Cogeco 2014 Annual Report Download - page 67

66 COGECO CABLE INC. 2014 Consolidated financial statements
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 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.
J) SHARE-BASED PAYMENT
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 payment 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 payment 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 payment 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 payment reserve. The total vesting period of each grant is three years less one day.
Cash-settled awards
The fair value of the amount payable to the members of the Board of Directors in respect of share appreciation rights under the Deferred
Share Unit Plan of the Corporation, which are settled in cash, is recognized as a compensation expense with a corresponding increase
in pension plan liabilities and accrued employee benefits as of the date units are issued to the members of the Board of Directors. The
accrued liability is remeasured at the end of each reporting period, until settlement, using the average closing price of the subordinate
voting shares on the TSX for the twenty consecutive trading days immediately preceding by one day the closing date of the reporting
period. Any changes in the fair value of the liability are recognized in profit or loss.