Mail Stop 4561
November 17, 2005
Tom Manley
Senior Vice President, Finance & Administration
and Chief Financial Officer
Cognos Inc.
3755 Riverside Drive
P.O. Box 9707, Station T
Ottawa, ON Canada K1G 4K9
Re: Cognos Inc.
Form 10-K for the Fiscal Year Ended
February 28, 2005
Filed April 29, 2005
Form 10-Q for the fiscal quarter ended August 31, 2005
File No. 033-72402
Dear Mr. Manley:
We have reviewed the above referenced filings and have the
following comments. Please note that we have limited our review
to
the matters addressed in the comments below. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K For the Fiscal Year Ended February 28, 2005
Critical Accounting Estimates, page 44
1. We note in your revenue recognition disclosures that "the fair
value of the product support portion of the arrangement is based
on
the product support renewal rate if product support is negotiated
separately and the rate is reflective of the expected renewal rate
for the first support period not covered by the arrangement."
Tell
us how you determined that the negotiated product support rate and
the renewal rate for the first support period met the substantive
test for establishing VSOE for product support. In this regard,
help
us understand whether the price charged for product support
renewals
are different for each customer.
2. We also note that "if product support is not separately
negotiated
in the agreement, product support is separated based on a
percentage
of negotiated license fees consistent with similar transactions."
Please explain what you mean by this statement and provide an
example
of your calculations for determining VSOE when product support is
not
separately negotiated. Do these contracts include stated renewal
rates or does the Company sell product support for these products
separately beyond the first year? If so, tell us how you
determined
that the renewal rates or separate sales were not sufficient
evidence
to establish the fair value for product support in these
agreements.
3. We note in your business section that you continue to provide
updates to your software products (e.g. Impromptu Web Reports 7.3,
Cognos Query 7.3, Cognos Metrics Manager 2.2, etc.). Tell us
whether
these updates are included as part of your product support
services
and whether these updates were specified or unspecified to
customers
that purchased the previous version of the software. Tell us how
you
considered paragraphs 36 - 38 of SOP 97-2 in accounting for
updates,
as applicable. Please advise.
Form 10-Q For the Quarterly Period Ended August 31, 2005
Item 4. Controls and Procedures, page 55
4. We note in your controls and procedures section that you have
evaluated the disclosure controls and procedures as of and
unspecified date that is within 90 days before the filing date of
this quarterly report. Tell us what consideration you have given
to
SEC Release No. 33-8238 which requires that the evaluation be done
as
of the end of the period covered by the annual or quarterly
reports.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Patrick Gilmore at (202) 551-3406 or me at
(202) 551-3730 if you have questions regarding comments on the
financial statements and related matters.
Sincerely,
Kathleen Collins
Accounting Branch Chief
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Tom Manley
Cognos Inc.
November 17, 2005
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