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70 COGECO CABLE INC. 2014 Consolidated financial statements
Q) ACCOUNTING JUDGEMENTS 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's 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 (see Note 21 A));
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 (see Note 6);
Depreciation of property, plant and equipment and amortization of intangible assets
Measurement of property, plant and equipment and intangible assets with finite useful lives requires estimates for determining the
asset expected useful lives and residual values. Management's judgement is also required to determine the components and the
depreciation method used (see Note 8);
Provisions
Management's judgement is used to determine the timing, likelihood and to quantify expected cash outflows as well as the discount
rate (see Note 15);
Fair value measurement of derivative financial instruments
The fair value of derivative financial instruments is estimated using valuation techniques based on several market data such as
interest rates, foreign exchange rates and the Corporation's or counterparties' credit risks;
Measurement of defined benefit obligation
The net defined benefit obligation is determined using actuarial calculations that are based on several assumptions. The actuarial
valuation uses the Corporation's assumptions for the discount rate, the expected rate of compensation increase, the indexation
rate of pension paid and the mortality table. If the actuarial assumptions are found to be significantly different from the actual data
subsequently observed, it could impact the reported amount of defined benefit pension cost recognized in profit or loss, the
remeasurement of the net defined benefit asset or liability 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 (see Note 20);
Measurement of non-financial assets
The measurement of non-financial assets requires the use of management judgement to identify the existence of impairment
indicators and the determination of CGUs. Furthermore, when determining the recoverable amount of a CGU or an asset, 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 (Note
14); 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 (see Note 10).
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.