Tucows 2015 Annual Report Download - page 179

(d) Inventory
Inventory primarily consists of mobile devices and other accessories, and is stated at the lower of cost or net
realizable value. Cost is determined based on actual cost of the mobile device or accessory shipped.
The net realizable value of inventory is analyzed on a regular basis. This analysis includes assessing
obsolescence, sales forecasts, product life cycle, marketplace and other considerations. If assessments regarding the above
factors adversely change, we may be required to write down the value of inventory.
(e) Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-
line basis so as to depreciate the cost of depreciable assets over their estimated useful lives at the following rates:
Asset Rate
Computer equipment 30%
Computer software 100%
Furniture and equipment 20%
Vehicles and tools 20%
Fiber network (years) 15
Customer equipment and installations (years) 3
Leasehold improvements Over term of
lease
The Company reviews the carrying values of its property and equipment for potential impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated
undiscounted future cash flows expected to result from the use of the group of assets and its eventual disposition is less
than its carrying amount, it is considered to be impaired. The amount of the impairment loss recognized is measured as the
amount by which the carrying value of the asset exceeds the fair value of the asset, with fair value being determined based
upon discounted cash flows or appraised values, depending on the nature of the assets.
Additions to the fiber network are recorded at cost, including all material, labor, vehicle and installation and
construction costs and certain indirect costs associated with the construction of cable transmission and distribution
facilities. While the Company’s capitalization is based on specific activities, once capitalized, costs are tracked by
fixed asset category at the fiber network level and not on a specific asset basis. For assets that are retired, the estimated
historical cost and related accumulated depreciation is removed.
(f) Derivative Financial Instruments
The Company uses derivative financial instruments to manage foreign currency exchange risk. The Company
accounts for these instruments in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 815, “Derivatives and Hedging” ("Topic 815"), which requires that every derivative
instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date.
Topic 815 also requires that changes in our derivative financial instruments’ fair values be recognized in earnings, unless
specific hedge accounting and documentation criteria are met (i.e. the instruments are accounted for as hedges). The
Company recorded the effective portions of the gain or loss on derivative financial instruments that were designated as
cash flow hedges in accumulated other comprehensive income in our accompanying Consolidated Balance Sheets. Any
ineffective or excluded portion of a designated cash flow hedge, if applicable, is recognized in net income.
For certain contracts, the Company has not complied with the documentation standards required for its forward
foreign exchange contracts to be accounted for as hedges and has, therefore, accounted for such forward foreign exchange
contracts at their fair values with the changes in fair value recorded in net income.
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