Cogeco 2012 Annual Report Download - page 56

Consolidated financial statements COGECO CABLE INC. 2012 55
P. SEGMENT REPORTING
An operating segment is a component of the Corporation that engages in business activities from which it may earn revenue and incur
expenses, including revenue and expenses that relate to transaction with any of the Corporation’s other components. All operating
segments’ operating results are reviewed regularly by the Corporation’s Chief Operating Decision Maker (“CODM”) to decide about
resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. Segment
results that are directly reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
Q. ACCOUNTING JUDGEMENT AND USE OF ESTIMATES
The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses.
Significant areas requiring the use of management judgements and estimates relate to the following items:
 Allowance for doubtful accounts
Allowance for doubtful accounts is established based on specific credit risk of the Corporation’s customers by examining such
factors as the number of overdue days of the customer’s balance outstanding as well as the customer’s collection history. As a
result, conditions causing fluctuations in the aging of customer accounts will directly impact the reported amount of bad debt
expenses;
 Business combinations
Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at
date of acquisition and involves considerable judgement in determining the fair values assigned to the property, plant and
equipment and intangible assets acquired and liabilities assumed on acquisition. Among other things, the determination of these
fair values involves the use of discounted cash flow analyses, estimated future margins and estimated future customer counts;
 Useful lives of property, plant and equipment and intangible assets
Measurement of property, plant and equipment and intangible assets with finite useful lives requires estimates for determining
the asset’s expected useful lives and residual values. Management judgement is required to determine the components and the
depreciation method used;
 Provisions
Management judgement is used to determine the timing, likelihood and to quantify expected cash outflows;
 Fair value measurement of derivative financial instruments
The fair value of derivative financial instruments is estimated using valuation techniques based on several inputs such as
interest rates and volatilities and foreign exchange rates;
 Measurement of defined benefit assets and liabilities
The defined benefit pension plan liabilities are determined using actuarial calculations that are based on several assumptions.
The actuarial valuation uses the Corporation’s assumptions for the discount rate, expected long-term rate of return on plan
assets, rate of compensation increase and expected average remaining years of service of employees. If the actuarial
assumptions are found to be significantly different from the actual data subsequently observed, it could impact the reported
amount of pension cost recognized in profit or loss, the actuarial gains and losses recognized directly in other comprehensive
income, and the net assets or net liabilities related to these obligations presented in the consolidated statement of financial
position;
 Measurement of assets
The impairment of non-financial assets requires the use of management judgement to identify the existence of indicators of
impairment and the determination of CGUs. Furthermore, when determining the recoverable amount of a CGU, the Corporation
uses significant estimates such as the estimation of future cash flows and discount rates applicable. Any significant modification
of market conditions could translate into an inability to recover the carrying amounts of non-financial assets; and
 Deferred taxes
Deferred tax assets and liabilities require estimates about the nature and timing of future permanent and temporary differences,
the expected timing of reversals of those temporary differences and the future tax rates that will apply to those differences.
Judgment is also required in determining the tax basis of indefinite life intangible assets and the resulting tax rate used to
measure deferred taxes.
Such judgments and estimates are based on the facts and information available to the management of the Corporation. Changes in facts
and circumstances may require the revision of previous estimates, and actual results could differ from these estimates.