NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Multiple Deliverable Arrangements Unearned Revenue Income Taxes We offer some products and services as part of multiple deliverable arrangements. We record these as follows: GLYPH<129> Divide the products and services into separate units of accounting, as long as the delivered elements have stand-alone value to customers and we can determine the fair value of any undelivered elements objectively and reliably. GLYPH<129> Measure and allocate the arrangement consideration among the accounting units based on their relative fair values and recognize revenue when the relevant criteria are met for each unit. We record payments we receive in advance of providing goods and services as unearned revenue. Advance payments include subscriber deposits, cable installation fees and amounts subscribers pay for services and subscriptions that will be provided in future periods. S tock-Based Compensation and Other S tock-Based Payments Stock Option Plans Restricted Share Unit (RSU) Plan Cash-settled share appreciation rights (SARs) are attached to all stock options granted under our employee stock option plan. This feature allows the option holder to choose to receive a cash payment equal to the intrinsic value of the option (the amount by which the market price of the Class B Non-Voting share exceeds the exercise price of the option on the exercise date) instead of exercising the option to acquire Class B Non-Voting shares. We classify all outstanding stock options as liabilities and carry them at their fair value, determined using option valuation techniques that comply with IFRS 2, Share-based Payment. We re- measure the fair value of the liability each period and amortize it to operating costs using graded vesting, either over the four-year vesting period or to the date an employee is eligible to retire (whichever is shorter). We record outstanding RSUs as liabilities, measuring the liabilities and compensation costs based on the award’s fair value, and recording it as a charge to operating costs over the vesting period of the award. If the award’s fair value changes after it has been granted and before the settlement date, we record the resulting changes in the liability as a charge to operating costs in the year that the change occurs. The payment amount is established as of the vesting date. Deferred Share Unit (DSU) Plan We record outstanding DSUs as liabilities, measuring the liabilities and compensation costs based on the award’s fair value at the grant date. If the award’s fair value changes after it has been granted and before the settlement date, we record the resulting changes in our liability as a charge to operating costs in the year that the change occurs. The payment amount is established as of the exercise date. Employee Share Accumulation Plan Employees voluntarily participate in the share accumulation plan by contributing a specified percentage of their regular earnings. We match employee contributions up to a certain amount, and record our contributions as a compensation expense in the year we make them. See note 24 for more information about our stock-based compensation and other stock-based payments. 96 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT We initially recognize cash and cash equivalents, accounts receivables, debt securities and accounts payable and accrued liabilities on the date they originate, and apply the criteria noted below. All other financial assets and financial liabilities are initially recognized on the trade date when we become a party to the contractual provision of the instrument. Financial Instruments Recognition GLYPH<129> revenue and expenses other than depreciation and amortization – at the average rate for the month when the transaction was recorded. GLYPH<129> non-monetary assets, non-monetary liabilities and related depreciation and amortization expenses – at the historical exchange rates GLYPH<129> monetary assets and monetary liabilities – at the exchange rate in effect at the date of the consolidated statements of financial position Foreign Currency Translation We translate amounts denominated in foreign currencies into Canadian dollars as follows: See note 9 for more information about our income taxes. We rely on estimates and assumptions when determining the amount of current and deferred tax, and take into account the impact of uncertain tax positions and whether additional taxes and interest may be due. If new information becomes available and changes our judgment on the adequacy of existing tax liabilities, these changes would affect the income tax expense in the period that we make this determination. We recognize a deferred tax asset for unused losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable income will be available to use the asset. We use judgement to evaluate whether we can recover a deferred tax asset based on our assessment on existing tax laws, estimates of future profitability and tax planning strategies. GLYPH<129> different tax entities where these entities intend to settle current tax liabilities and assets on a net basis or the tax assets and liabilities will be realized simultaneously. GLYPH<129> the same taxable entity, or Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same authority on: Deferred tax assets and liabilities arise from temporary differences between the carrying amounts of the assets and liabilities we record in our consolidated statements of financial position and their respective tax bases. We calculate deferred tax assets and liabilities using enacted or substantively enacted tax rates that will apply in the years the temporary differences are expected to reverse. Current tax expense is tax we expect to pay or receive based on our taxable income or loss during the year. We calculate the current tax expense using tax rates enacted or substantively enacted at the reporting date, and including any adjustment to taxes payable or receivable related to previous years. Income tax expense includes both current and deferred taxes. We use judgment to interpret tax rules and regulations to calculate the expense recorded each period. We recognize income tax expense in net income unless it relates to an item recognized directly in equity or other comprehensive income.