Cogeco 2014 Annual Report Download - page 64

Consolidated financial statements COGECO CABLE INC. 2014 63
B) BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. Goodwill is measured as the excess of the fair value of the
consideration transferred including the recognized amount of any non-controlling interest in the acquiree over the net recognized amount
of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date.
The consideration transferred is measured as the sum of the fair values of assets transferred, liabilities assumed, and equity instruments
issued by the Corporation at the acquisition date, including any asset or liability resulting from a contingent consideration arrangement,
in exchange for control of the acquiree.
A right to receive or an obligation to pay contingent consideration is classified as an asset or a liability or as equity. Contingent
consideration classified as equity is not remeasured until it is finally settled within equity. Contingent consideration classified as an
asset or a liability is measured either as a financial instrument or as a provision. Changes in fair values that qualify as measurement
period adjustments of preliminary purchase price allocations are adjusted in the current period and such changes are applied on a
retroactive basis.
Acquisition costs, other than those associated with the issuance of debt or equity securities, and integration and restructuring costs
that the Corporation incurs in connection with a business combination are recognized in profit or loss as incurred.
C) REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable, net of returns and discounts. The Corporation
recognizes revenue from the sale of products or the rendering of services when the following conditions are met:
The amount of revenue and related costs can be measured reliably;
The significant risks and rewards of ownership have been transferred to customers and there is no continuing management
involvement to the degree usually associated with ownership nor effective control over the goods; and
The recovery of the consideration is probable.
More specifically, the Corporation's principal sources of revenue are recognized as follows:
Monthly subscription revenue for Cable Television, HSI and Telephony services and rental of equipment are recognized as
the services are provided;
Revenue from data services, long-distance and other pay-per-use services are recognized as the services are provided;
Revenue from managed services, colocation services, cloud services and connectivity services are recognized as the services
are provided; and
Revenue generated from the sale of home terminal devices or other equipment are recognized when the customer accepts
the delivery of the equipment.
Multiple-element arrangements
The Corporation offers certain products and services as part of multiple deliverable arrangements. The Corporation evaluates each
deliverable arrangement to determine if it would represent a separate component. Components are accounted separately when:
The delivered elements have stand-alone value to the customer; and
There is an objective and a reliable evidence of fair value of any undelivered elements.
Consideration is measured and allocated between the components based upon their relative fair values while applying the relevant
revenue recognition policy.
The Corporation considers that installation and activation fees are not separate components because they have no stand-alone value.
Accordingly, they are deferred and amortized as revenue at the same pace as the related telecommunications services are earned,
which is the average life of a customer's subscription for Cable service customers or the term of the agreement for Enterprise data
service customers.
Unearned revenue, such as payments for goods and services received in advance of delivery, are recorded as deferred and prepaid
revenue until the service is provided or the product is delivered to the customer.
D) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured 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.
The cost of replacing a part of property, plant and equipment that is ready for its intended use is added to the carrying amount of the
property, plant and equipment or recognized as a separate component if applicable, only if it is probable that the economic benefits
associated with the cost will flow to the Corporation and the cost can be measured reliably. The carrying amount of the replaced part
is derecognized. All other day-to-day maintenance costs are recognized in profit or loss in the period in which they are incurred.