Cogeco 2012 Annual Report Download - page 50

Consolidated financial statements COGECO CABLE INC. 2012 49
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated depreciation and accumulated impairment losses.
During construction of new assets, direct costs plus overhead costs directly attributable to the asset are capitalized. Borrowing costs
directly attributable to the acquisition or construction of qualifying assets, which require a substantial amount of time to get ready for their
intended use or sale, are capitalized until such time the assets are substantially ready for their intended use or sale. All other borrowing
costs are recorded as financial expense in the period in which they are incurred.
Depreciation is recognized from the date the asset is ready for its intended use so as to write-off the cost of assets, other than freehold
land and properties under construction, less their residual values over their useful lives, using the straight-line method. Assets held under
finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the
relevant lease. The depreciation periods, which are reviewed on annual basis, are as follows:
BUILDINGS AND LEASEHOLD IMPROVEMENTS(1) 10 TO 40 YEARS
CABLE SYSTEMS(2) 5 TO 20 YEARS
HOME TERMINAL DEVICES 3 TO 5 YEARS
ROLLING STOCK AND EQUIPMENTS(3) 3 TO 10 YEARS
(1) Leasehold improvements are amortized over the shorter of the term of the lease and economic life.
(2) Cable systems include towers, headends, transmitters, fibre and coaxial networks, and customer drops.
(3) Rolling stock and equipments include rolling stock, programming equipment, furniture and fixtures, computer and software and other equipments.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
The estimated useful lives, residual values and depreciation method are reviewed annually, with the effect of any changes in estimate
accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sale proceeds and the carrying amount of the asset and is recognized in profit or loss.
The Corporation does not record decommissioning obligations in connection with its cable distribution network. The Corporation expects to
renew all of its agreements with utility companies to access their support structures in the future, thus the resulting present value of the
obligation is not significant.
E. INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired in a business combination and
recognized separately from goodwill are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition,
intangible assets are carried at cost less accumulated amortization and accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite useful lives are amortized over their useful life. The estimated useful lives are reviewed annually, with the
effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with finite useful lives are amortized as
follows:
 Customer relationships are amortized on a straight-line basis over the estimated useful life, defined as the average life of a
customer’s subscription, not exceeding eight years;
 Reconnect and additional service activation costs are capitalized up to a maximum amount not exceeding the revenue
generated by the reconnect activity and are amortized over the average life of a customer’s subscription, not exceeding four
years; and
 Direct and incremental costs associated with the acquisition of Enterprise service customers are capitalized and amortized over
the term of the agreement.
Intangible assets with indefinite useful lives are those for which there is no foreseeable limit to their useful economic life as they arise from
contractual or other legal rights that can be renewed without significant cost. They comprised Cable Distribution Undertaking Broadcasting
Licences (“Cable Distribution Licences”). Cable Distribution Licences are comprised of broadcast authorities licenses and exemptions from
licensing that allow access to homes and customers in a specific area. The Corporation has concluded that the Cable Distribution Licences
have indefinite useful lives since there are no legal, regulatory, contractual, economic or other factors that would prevent their renewals or
limit the period over which they will contribute to the Corporation’s cash flows. The Corporation reviews at the end of each reporting period
whether event and circumstances continue to support indefinite useful life assessment for these licences. Intangible assets with indefinite
useful lives are not amortized, but tested for impairment at least annually or more frequently if there is any indication of impairment.
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately
recognized. It is not amortized but tested for impairment at least annually, or whenever there is an indication of possible impairment.