The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles ("GAAP"). The Company's significant accounting policies are presented in note 1 of the audited consolidated financial statements.

NEW ACCOUNTING POLICIES
The Company's accounting policies were unchanged in Fiscal 2006 except for the implementation of the Canadian Institute of Chartered Accountants' ("CICA's") recommendations on Non-monetary Transactions. The accounting policy for non-monetary transactions is described in note 1.d) of the audited consolidated financial statements. For the year ended August 31, 2006, the adoption of these recommendations had no impact on the Company's results of operations.

CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, expenses and cash flows during the reporting period. The Ontario Securities Commission defines critical accounting estimates as those that require assumptions to be made about matters that are highly uncertain at the time the estimates are determined, and when the use of different reasonable estimates or changes to the accounting estimates would have a significant impact on a company's financial condition or results of operations. Based on this definition, the Company has identified the following critical accounting estimates:

Goodwill and Broadcast Licences
Goodwill and broadcast licences are not amortized but tested annually for impairment or more frequently if events or circumstances indicate that it is more likely than not that they might be impaired. The Company compares a reporting unit's carrying value (including any goodwill or broadcast licences) to its fair value calculated on the basis of assumptions and estimates relating to the reporting unit's future financial performance. The Company has concluded that no provision for impairment is required on the basis of its latest impairment tests. However, if the assumptions and estimates used in performing these tests prove to be different, an impairment provision could be required in the future.

Impairment of Long-lived Assets
The Company tests the recoverability of long-lived assets when events or circumstances indicate that their carrying amounts may not be recoverable. Long-lived assets primarily include the Company's property, plant and equipment. An impairment loss is recognized when the carrying value of a long-lived asset exceeds the undiscounted future cash flows expected from its use and eventual disposition. Except for a provision recorded with regards to the radiolibre.ca project (see "Depreciation and Amortization"), the Company believes that no provision for impairment is required. However, if the assumptions and estimates used in performing these tests prove to be different, an impairment loss could be charged to future results.

Employee Future Benefits
The Company has a voluntary defined benefit pension plan available to employees hired before December 1, 2005, and ensures that contributions are sustained at a level sufficient to cover benefits. Key assumptions include the discount rate, the expected long-term rate of return on plan assets and the rate of salary escalation, all of which are disclosed in note 17 of the audited consolidated financial statements.

The discount rate assumption used to calculate the present value of the Company's plans' projected benefit payments was determined using a measurement date of June 30, 2006 and is based on yields of long-term high-quality fixed income investments. The expected long-term rate of return on pension plan assets was obtained by calculating a weighted average rate based on targeted asset allocations of the plans. The expected returns of each asset class are based on a combination of historical performance analysis and forward-looking views of the financial markets. The targeted asset allocation of the plans is generally 60% for equity and 40% for fixed income securities.

The rate of salary escalation is used to project current plan earnings in order to estimate pension benefits at future dates. This assumption was determined on the basis of market data obtained from independent sources. The Company believes that the assumptions are reasonable based on information currently available, but changes to these assumptions could impact pension benefit expenses and obligations recognized in future periods.

The Company also offers a voluntary defined contribution component available to all employees hired on or after December 1, 2005. The pension expense related to this component represents the contribution paid by the Company for services rendered by the employees during the period. For the year ended August 31, 2006, the contributions paid by the Company under the defined contribution pension plan are not significant and are included in operating expenses on the audited consolidated statements of earnings and retained earnings.

Since June 1, 2006, employees hired before December 1, 2005 have the choice to transfer from the defined benefit to the defined contribution plan or to remain in the defined benefit plan.

Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts to provide for estimated potential losses that would result from amounts not recovered from customers. The allowance is reviewed periodically and is based on an analysis of specific significant accounts outstanding, the age of the receivable, customer credit worthiness, and historical collection experience.

Income Taxes
The future income tax assets and liabilities are measured using the income tax rates that are expected to apply upon realization or settlement. They are also determined on the basis of management's best estimates of the period over which they will be realized or settled. Future income tax assets are recognized to the extent that the realization of benefits is considered more likely than not. In the event that the actual outcome differs from management's assumptions and estimates, the carrying amounts may be adjusted. Management believes that its estimates are reasonable and reflect the probable outcome of known tax contingencies.

Accrued Liabilities and Contingencies
Accrued liabilities for supplier audits, retroactive regulatory rulings, legal issues and other contingencies are established on the basis of management's best estimate of the probable outcome and resolution of these matters.

While management believes that these accrued liabilities are adequate, the use of different assumptions or estimates could have a significant impact on the Company's results of operations and financial condition.

Stock-based Compensation Cost
The assumptions used to determine the stock-based compensation expense are presented in note 12.d) of the audited consolidated financial statements. They were determined on the basis of available comparable market data and historical data. The Company believes that the assumptions are reasonable based on information currently available, but changes to these assumptions could impact the stock-based compensation expense in future periods.

RECENT ACCOUNTING PRONOUNCEMENTS

Comprehensive Income
The CICA issued section 1530 of the CICA Handbook, Comprehensive Income. The section is effective for fiscal years beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components.

Comprehensive income is the change in a company's net assets that results from transactions, events and circumstances from sources other than the company's shareholders. It includes items that would not normally be included in net earnings, such as:

• Changes in the currency translation adjustment relating to self-sustaining foreign operations;
• Unrealized gains or losses on available-for-sale investments;
• Gains or losses on derivatives designated as cash flow hedges.

The CICA also made changes to section 3250 of the CICA Handbook, Surplus, and reissued it as section 3251, Equity. The section is also effective for fiscal years beginning on or after October 1, 2006. The changes regarding the reporting and disclosure of equity and changes in equity are consistent with the new requirements of section 1530, Comprehensive Income.

When the Company adopts these sections on September 1, 2007, it will report the following additional items in the audited consolidated financial statements:

• Comprehensive income and its components;
• Accumulated other comprehensive income and its components.

Financial Instruments - Recognition and Measurement
The CICA issued section 3855 of the CICA Handbook, Financial Instruments - Recognition and Measurement. The section is effective for fiscal years beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that:

• All financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held to maturity;
• All financial liabilities be measured at fair value if they are derivatives or classified as held for trading purposes. Other financial liabilities are measured at their carrying value;
• All derivative financial instruments be measured at fair value, even when they are part of a hedging relationship.

The CICA has also reissued section 3860 of the CICA Handbook as section 3861, Financial Instruments -Disclosure and Presentation, which establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. These revisions come into effect for fiscal years beginning on or after October 1, 2006.

These new accounting standards are not expected to have a significant effect on the Company's financial results and will be adopted in Fiscal 2008.

Harmonization of Canadian GAAP to International Financial Reporting Standards
In 2005, the Accounting Standards Board finalized its strategic plan for financial reporting in Canada whereby Canadian GAAP will converge with International Financial Reporting Standards over a five-year period. After this transitional period, Canadian GAAP will cease to exist as a separate, distinct basis of financial reporting. The Company will continue to monitor the changes resulting from this transition.

Accounting Changes
In July 2006, the CICA issued changes to the CICA Handbook section 1506, Accounting Changes. The changes to this section particularly affect the following:

• An entity would be permitted to change an accounting policy only when it is required by a primary source of GAAP, or when the change results in a more reliable and relevant presentation in the financial statements;
• Changes in accounting policy should be applied retroactively, except in cases where specific transitional provisions in a primary source of GAAP permit otherwise or where application to comparative information is impractical (the standard provides specific guidance as to what is considered impractical);
• Expanded disclosures about the effects of changes in accounting policy, estimates and errors on the financial statements;
• Disclosure of new primary sources of GAAP that have been issued but have not yet come into effect and have not yet been adopted by the entity.

Changes to this section are effective for interim and annual periods beginning on or after January 1, 2007 and will be adopted by the Company as of that date.

INTER-COMPANY AND RELATED-PARTY TRANSACTIONS
Inter-company and related-party transactions and balances between companies and divisions owned by the Company are eliminated upon consolidation for subsidiaries and on a pro rata basis for joint ventures. There are no other significant related-party transactions to report.

SUPPLEMENTARY MEASURES
In addition to discussing earnings measures in accordance with GAAP, this MD&A provides earnings before interest, taxes, depreciation and amortization ("EBITDA") as a supplementary earnings measure. Other items such as the results from discontinued operations are excluded from earnings in the determination of EBITDA, as they are not considered to be in the ordinary course of business. EBITDA is provided to assist investors in determining the ability of the Company to generate cash from continuing operations and to cover financial charges. It is also an indicator widely used for business valuation purposes. EBITDA margin is defined as the ratio obtained by dividing EBITDA by revenues.

The following table reconciles EBITDA to GAAP measures disclosed in the audited consolidated statements of earnings and retained earnings for the periods ended August 31, 2006 and 2005:

	3 months		12 months
(in thousands of $)	2006	2005	2006	2005
Earnings from continuing operations before income taxes	43,542	43,015	175,501	159,156
Depreciation and amortization	8,036	4,123	19,629	15,732
Interest income, net	(1,236)	(702)	(3,385)	(2,272)
EBITDA	50,342	46,436	191,745	172,616

The MD&A discloses net earnings and earnings per share from continuing operations before the impact of the net future income tax recovery resulting from income tax rate changes enacted in December 2005 and June 2006. These measures provide an indication of the Company's ability to generate earnings and cash flows from its ongoing operations, by excluding the impact of the net non-cash future income tax recovery which resulted from income tax rate changes over which the Company has no control.

The following tables reconcile net earnings and earnings per share from continuing operations, before the impact of future income tax rate changes, to GAAP measures disclosed in the audited consolidated statements of earnings and retained earnings for the years ended August 31, 2006 and 2005.

	3 months		12 months
(in thousands of $)	2006	2005	2006	2005
Net earnings from continuing operations	52,771	28,309	123,759	104,446
Impact of future income tax rate changes	(23,606)	—	(8,791)	—
Net earnings from continuing operations, before the impact   of future income tax rate changes	29,165	28,309	114,968	104,446

	3 months		12 months
(in dollars)	2006	2005	2006	2005
Earnings per share from continuing operations - basic	0.99	0.51	2.30	1.87
Impact of future income tax rate changes	(0.44)	—	(0.16)	—
Earnings per share from continuing operations, before impact   of future income tax rate changes - basic	0.55	0.51	2.14	1.87

Cash flow from continuing operations is also disclosed as a supplementary measure. Cash flow from continuing operations is defined as cash flow from continuing operating activities before the net change in non-cash operating items. This measure provides an indication of the Company's ability to generate cash flows without considering certain timing and other factors causing variations in non-cash items.

The following table reconciles cash flow from continuing operations to GAAP measures disclosed in the audited consolidated statements of cash flows for the years ended August 31, 2006 and 2005.

	3 months		12 months
(in thousands of $)	2006	2005	2006	2005
Cash flows from continuing operating activities	43,260	36,078	126,205	99,690
Net change in non-cash operating items	372	4,302	18,938	31,146
Cash flows from continuing operations	43,632	40,380	145,143	130,836

The above measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.