Tucows 2015 Annual Report Download - page 177

Tucows Inc.
Notes to Consolidated Financial Statements
(Dollar Amounts in U.S. dollars)
1. Organization of the Company:
Tucows Inc. (the “Company”) provides simple useful services that help people unlock the power of the Internet.
The Company provides US consumers and small businesses with mobile phone services nationally and high-speed fixed
Internet access in selected towns. The Company is also a global distributor of Internet services, including domain name
registration, digital certificates, and email. It provides these services primarily through a global Internet-based distribution
network of Internet Service Providers, web hosting companies and other providers of Internet services to end-users.
2. Significant accounting policies:
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars, except where otherwise noted.
Certain of the prior year comparative figures have been reclassified to conform with the financial statement presentation
adopted in the current year. In December 2013, our Board of Directors authorized a one-for-four share consolidation of our
common stock, in the form of a reverse stock split, as further described in note 11. All share information related to shares
outstanding and earnings per share have been retroactively adjusted to reflect this share consolidation.
(a) Basis of presentation
These consolidated financial statements include the accounts of the Company and its subsidiaries. All significant
intercompany balances and transactions have been eliminated on consolidation.
Investments over which the Company is unable to exercise significant influence are recorded at cost and written
down only when there is evidence that a decline in value that is other than temporary has occurred.
In prior periods, the Company recorded the effective portion of the gain or loss upon settlement of hedged
currency forward contracts in “Loss on currency forward contracts” and reclassified the same amount from “General and
administrative expense” to the income statement line item for the hedged item. The Company has determined that the
reclassification of the effective portion of the gain or loss upon settlement amounts are more appropriately reclassified
from “Loss on currency forward contracts” to the income statement line item for the hedged item. As a result, losses of
$1.0 million and $0.3 million for the years ended December 31, 2014 and 2013 respectively, have been reclassified to
“General and administrative expense” from “Loss on currency forward contracts”. As a result of this reclassification, there
was no change to previously reported net income, income from operations, net revenues, gross profit, reported cash flows
or the amounts recorded in the consolidated balance sheets.
(b) Use of estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those
related to amounts recognized for or carrying values of revenues, bad debts, goodwill and intangible assets which require
estimates of future cash flows and discount rates, income taxes, contingencies and litigation, and estimates of credit
spreads for determination of the fair value of derivative instruments. Management bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable under the circumstances at the time they are
made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those
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