Recent accounting pronouncements:

Recent Accounting Pronouncements Adopted

January 1, 2018,

the Company adopted Accounting Standards Updates ("ASU")

No.

2017

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business

and ASU

2015

16,

Simplifying the Accounting for Measurement-Period Adjustments.

The adoption of these updates did

not

have a significant impact on the consolidated financial statements. We also adopted ASU

2014

January 1, 2018.

The impact of such adoption is described in more detail below.

ASU

2014

09:

Adoption of Revenue from Contracts with Customers (Topic

606

)

January

2018,

the Company adopted ASU

2014

using the modified retrospective method by recognizing the cumulative effect of initially applying ASU

2014

as an adjustment to the opening balance of equity as at

January 1, 2018.

The results for reporting periods beginning after

January

2018

are presented under ASU

2014

09,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting policy, under Accounting Standards Codification (“ASC”) Topic

605,

Revenue Recognition (ASC Topic

605

). The adoption of ASU

2014

did

not

affect the Company’s cash flows from operating, investing, or financing activities. Furthermore, the impact on timing of revenue recognition was

not

material as the treatment of revenue for services rendered over time is consistent under ASU

2014

and ASC Topic

605.

The details of the significant changes and quantitative impact of the changes are set out below. For a more comprehensive description of how the Company recognizes revenue under the new revenue standard in accordance with its performance obligations, see note

– Revenue for more information.

The Company previously recognized commission fees related to Ting Mobile, Ting Internet, eNom domain registration and eNom domain related value-added service contracts as selling expenses when they were incurred. Under ASU

2014

09,

when these commission fees are deemed incremental and are expected to be recovered, the Company capitalizes as an asset such commission fees as costs of obtaining a contract. These commission fees are amortized into income consistently with the pattern of transfer of the good or service to which the asset relates. The amortization of deferred costs of acquisition are amortized into Sales and marketing expense. The estimation of the amortization period for the costs to obtain a contract requires judgement.

Under ASU

2014

09,

the Company has applied the following practical expedients

When the amortization period for costs incurred to obtain a contract with a customer is less than

one

year, the Company has elected to apply a practical expedient to expense the costs as incurred; and

For mobile and internet access services, where the performance obligation is part of contracts that have an original expected duration of

one

year or less (typically

one

month), the Company has elected to apply a practical expedient to

not

disclose revenues expected to be recognized in the future related performance obligations that are unsatisfied (or partially unsatisfied).

January 1, 2018

as a result of adopting ASU

2014

09,

the Company recorded a contract cost asset of

$1.4

million with a corresponding increase to opening retained earnings and deferred tax liability of

$1.1

million and

$0.3

million, respectively, due to the deferral of costs of obtaining contracts.

The impact of the changes to the Company’s financial statements in the current period are as follows

(Dollar amounts in thousands of U.S. dollars)

	September 30, 2018

						Balances without
Consolidated Balance Sheet	As reported		Adjustments			adoption of Topic 606

Assets

Contract Costs (note 11(a))	$	1,383	$	(1,383	)	$	-
Total assets		337,495	$	(1,383	)	$	336,112

Liabilities and Shareholders' Equity

Deferred tax liability (note 8)	$	19,265	$	(336	)	$	18,929
Retained earnings		56,373		(1,047	)		55,326
Total Liabilities and Shareholders' Equity	$	337,495	$	(1,383	)	$	336,112

	Three months ended, September 30, 2018							Nine months ended, September 30, 2018

						Balances without							Balances without
Consolidated Statements of Operations and Comprehensive Income	As reported		Adjustments			adoption of Topic 606		As reported		Adjustments			adoption of Topic 606

Expenses

Sales and marketing	$	8,412	$	29		$	8,441	$	24,629	$	(21	)	$	24,608
Income before provision for income taxes		6,716		(29	)		6,687		16,479		21			16,500

Provision for income taxes (note 8)		1,370		(7	)		1,363		3,781		5			3,786
Net income for the period	$	5,346	$	(22	)	$	5,324	$	12,698	$	16		$	12,714

	Three months ended, September 30, 2018									Nine months ended, September 30, 2018

							Balances without									Balances without
Consolidated Statements of Cash Flows	As reported			Adjustments			adoption of Topic 606			As reported			Adjustments			adoption of Topic 606

Net income for the period	$	5,346		$	(22	)	$	5,324		$	12,698		$	16		$	12,714

Items not involving cash
Amortization contract costs		(29	)		29			(0	)		21			(21	)		-
Deferred income taxes (recovery)		(369	)		(7	)		(376	)		(861	)		5			(856	)
Net cash provided by operating activities		11,214		$	-		$	11,214		$	26,541		$	-		$	26,541

Recent Accounting Pronouncements

Not

Yet Adopted

August 2018,

the Financial Accounting Standards Board (“FASB”) issued ASU

No.

2018

15,

Intangibles—Goodwill and Other—Internal-Use Software

(Subtopic

350

): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU

2018

15”

). ASU

2018

helps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance on accounting for implementation costs when the cloud computing arrangement does

not

include a licence and is accounted for as a service contract. The amendments in ASU

2018

require an entity (customer) in a hosting arrangement to assess which implementation costs to capitalize vs expense as it relates to a service contract. The amendments also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU

2018

will be effective for the Company for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years. The Company is currently in the process of evaluating the quantitative impact of this Update, and transition methods.

February 2016,

the FASB issued ASU

No.

2016

02,

Leases (Topic

842

)

(“ASU

2016

02”

). ASU

2016

requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. More specifically, ASU

2016

requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. The new guidance is effective for annual and interim reporting periods beginning after

December 15, 2018,

which begins on

January 1, 2019

for the Company. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company will adopt this guidance in the

first

quarter of fiscal

2019.

The Company is currently in the process of evaluating the impact of transition methods. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for administrative office operating leases.