Cogeco 2013 Annual Report Download - page 62

Consolidated financial statements COGECO CABLE INC. 2013 61
G) LEASES
Lessee
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to
ownership of the asset to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognized as assets of the Corporation at their fair value at the inception of the lease or, if lower,
at the present value of the minimum lease payments as determined at the inception of the lease. Subsequent to initial recognition, the
asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding liability is included in the
statement of financial position as a finance lease obligation. Lease payments are apportioned between financial expense and reduction
of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financial expense and
depreciation of the assets are recognized in profit or loss in the period they occur.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.
Lessor
The Corporation leases certain telecommunication equipment, primarily home terminal devices, to its customers. These leases are
classified as operating leases and rental revenue is recognized on a straight-line basis over the term of the relevant lease.
H) INCOME TAXES
Income tax expense represents the sum of the taxes 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 obligation amount. The amount recognized represents
management's best estimate required to settle the obligation at the end of the reporting period, taking into account the obligation's risks
and uncertainties. When the effect of the time value of money is material, the amount of the 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.