Cogeco 2012 Annual Report Download - page 52

Consolidated financial statements COGECO CABLE INC. 2012 51
H. INCOME TAXES
Income tax expense represents the sum of the tax currently payable and deferred. Current and deferred taxes are recognized in profit or
loss, except when they relate to a business combination or to items that are recognized in other comprehensive income or directly in
equity.
Current tax
The tax currently payable is based on taxable profit for the year. The Corporation’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted at the end of the reporting period.
Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are not recognized if the temporary difference
arises from the initial recognition of goodwill or assets or liabilities in a transaction that is not a business combination and that affects
neither the taxable profit nor the accounting profit or is related to investments in subsidiaries to the extent that the Corporation is able to
control the reversal and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are generally recognized for unused tax losses and deductible temporary differences to the extent that it is probable
that taxable profits will be available against which, those deductible temporary differences can be utilized. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or
the asset realized, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. The
measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities,
but the Corporation intends to settle its current tax assets and liabilities on a net basis.
I. PROVISIONS
Provisions represent liabilities of the Corporation for which the amount or timing is uncertain. A provision is recorded when the Corporation
has a legal or constructive present obligation as a result of a past event and it is probable that an outflow of economic benefits will be
required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized represents
management’s best estimate of the amount required to settle the obligation at the end of the reporting period, taking into account the risks
and uncertainties surrounding the obligation. When the effect of the time value of money is material, the amount of a provision is
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is
recognized as financial expense.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is
recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured
reliably.
J. SHARE-BASED PAYMENTS
Equity settled awards
The Corporation measures stock options granted to employees that vest rateably over the service period based on the fair value of each
tranche on grant date by using the Black-Scholes pricing model and a compensation expense is recognized on a straight-line basis over
the vesting period applicable to the tranche, with a corresponding increase in share-based compensation reserve. Granted options vest
equally over a period of five years beginning one year after the day such options are granted. At the end of each reporting period, the
Corporation revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates,
if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment in
share-based compensation reserve. When the stock options are exercised, share capital is credited by the sum of the consideration paid
and the related portion previously recorded in share-based compensation reserve.
The Corporation measures incentive share units (“ISUs”) granted to employees based on the fair value of the Corporation’s subordinate
voting shares at the date of grant and a compensation expense is recognized over the vesting period, with a corresponding increase in
share-based compensation reserve. The total vesting period of each grant is three years less one day.