Cogeco 2012 Annual Report Download - page 55

54 COGECO CABLE INC. 2012 Consolidated financial statements
Cash flow hedge accounting
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk
associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion
of changes in the fair value of the derivative is recognized in accumulated other comprehensive income and presented in unrealized gains
or losses on cash flow hedges in equity. The amount recognized in other accumulated comprehensive income is removed and included in
profit or loss in the same period as the hedged cash flows affect profit or loss and in the same line item as the hedged item. Any ineffective
portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires, is sold, terminated, exercised, or the designation is
revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in accumulated other
comprehensive income and presented in unrealized gains or losses on cash flow hedges in equity, remains there until the forecasted
hedged item affects profit or loss. If the forecasted hedged item is no longer expected to occur, then the balance in accumulated other
comprehensive income is recognized immediately in profit or loss.
In other cases the amount recognized in accumulated other comprehensive income is transferred to profit or loss in the same period in
which, the hedged item affects profit or loss.
Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the
host contract and the embedded derivative are not closely related. A separate instrument with the same terms as the embedded derivative
would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. At August 31,
2012 and 2011 and September 1, 2010, there were no significant embedded derivatives or non-financial derivatives that require separate
fair value recognition on the consolidated statements of financial position.
Impairment of financial assets
Trade and other receivables (“receivables”) are assessed at each reporting date to determine whether there is objective evidence that they
are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the
asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that receivables are impaired can include default or delinquency by a debtor or indications that a debtor will enter
bankruptcy.
The Corporation considers evidence of impairment for receivables at both a specific asset and aggregate basis. All individually significant
receivables are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Receivables that are not individually significant are assessed on an aggregate
basis for impairment by grouping together receivables with similar risk characteristics.
An impairment loss in respect of receivables is calculated as the difference between its carrying amount and the present value of the
estimated future cash flows. Losses are recognized in profit or loss and reflected in an allowance account presented in reduction of
receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
N. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments that have an original maturity of three months or less.
O. EARNINGS PER SHARE
The Corporation presents basic and diluted earnings per share data for its multiple and subordinate voting shares. Basic earnings per
share is calculated by dividing the profit or loss attributable to shareholders of the Corporation by the weighted average number of multiple
and subordinate voting shares outstanding during the period, adjusted for subordinate voting shares held in trust under the ISU Plan.
Diluted earnings per share is determined by adjusting the weighted average number of multiple and subordinate voting shares outstanding
for the effects of all dilutive potential subordinate voting shares, which comprise stock options and ISUs granted to employees.