---

Exhibit 99.2

COGNOS INCORPORATED 
MANAGEMENTS
DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CANADIAN
SUPPLEMENT(in United States
dollars, unless otherwise indicated, and in accordance with CDN GAAP)

The following Managements
Discussion and Analysis of Financial Condition and Results of Operations-Canadian
Supplement (Canadian Supplement) should be read in conjunction with our
Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) included in Item 2 of this quarterly report. The Canadian
Supplement should also be read in conjunction with the unaudited Consolidated Financial
Statements and Notes prepared in accordance with U.S. generally accepted accounting
principles (GAAP) (included in Item 1), the unaudited Consolidated
Financial Statements and Notes prepared in accordance with Canadian GAAP (included as
exhibit 99.1), and the audited Consolidated Financial Statements and Notes included in our
Annual Information Form for the fiscal year ended February 29, 2004.

The following contains
forward-looking statements and should be read in conjunction with the factors set forth in
the Certain Factors That May Affect Future Results section and the
Forward-looking Statements/Safe Harbor section of the MD&A in Item 2 of this quarterly
report. All dollar amounts in this Canadian Supplement are in thousands of United States
dollars unless otherwise stated. The Canadian Supplement has been prepared by management
to provide an analysis of the material differences between Canadian GAAP and U.S. GAAP on
our financial condition and results of operations.

# CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

In addition to the critical
accounting policies and estimates listed in the MD&A, we also use the following in the
preparation of our consolidated financial statements in accordance with Canadian GAAP:

Accounting for Stock
Option, Stock Purchase, and Restricted Share Unit Plans

The Corporation applies CICA Handbook
section 3870, Stock-based Compensation and Other Stock-based payments,
(CICA 3870) in accounting for its stock option, stock purchase, and
restricted share unit plans. Compensation expense for options granted and shares issued
under the Corporations stock option and restricted share unit plans is recognized
over their vesting period using the fair value method of accounting for stock-based
compensation. The fair value of the stock options and the restricted share units is
determined using the Black-Scholes option-pricing model. Any consideration paid by
employees on the exercise of stock options is credited to capital stock. The discount from
market price offered to employees who purchase stock through the Corporations stock
purchase plan is also recognized as a compensation expense in the period when the shares
are purchased.

70

---

COGNOS INCORPORATED 
MANAGEMENTS
DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CANADIAN
SUPPLEMENT(in United States
dollars, unless otherwise indicated, and in accordance with CDN GAAP)

# RESULTS OF OPERATIONS

|                                             |  | Three months endedAugust 31, |  | Six months endedAugust 31, | 
|-------------------------------------------- |  | ---------------------------- |  | -------------------------- | 
|                                            
|                                             |  | 2004                         |  | 2003                       | 
|                                            
|Income before taxes - U.S. GAAP              |  | $34,935                      |  | $24,874                    | 
|Income before taxes - Canadian GAAP          |  | $35,630                      |  | $22,956                    | 
|                                            
|Income tax provision - U.S. GAAP             |  | $  7,336                     |  | $  6,716                   | 
|Income tax provision - Canadian GAAP         |  | $11,389                      |  | $11,428                    | 
|                                            
|Net income per share diluted - U.S. GAAP     |  | $0.30                        |  | $0.20                      | 
|Net income per share diluted - Canadian GAAP |  | $0.26                        |  | $0.13                      | 

Acquired in-process
technology

Canadian GAAP requires capitalization
of the value assigned to acquired in-process technology and amortization of this value
over its estimated useful life. Under U.S. GAAP, this value is written off immediately.
The impact of this difference was to decrease income before taxes by $0.2 million and $0.5
million for the three months ended August 31, 2004 and August 31, 2003,
respectively, as compared to U.S. GAAP. For the six-month periods ending August 31, 2004
and August 31, 2003, the impact of this difference was to decrease income before taxes by
$0.5 million and $1.0 million, respectively, as compared to U.S. GAAP.

Investment tax credits

Canadian GAAP requires that
investment tax credits be deducted from operating expense. Under U.S. GAAP, these amounts
are deducted from the income tax provision. The impact of this difference was to increase
income before taxes and the income tax provision by $4.6 million and $4.9 million for the
three months ended August 31, 2004 and August 31, 2003, respectively, as compared to
U.S. GAAP. For the six-month periods ended August 31, 2004 and August 31, 2003, the
impact of this difference was to increase income before taxes and the income tax provision
by $7.6 million and $7.3 million, respectively, as compared to U.S. GAAP.

71

---

COGNOS INCORPORATED 
MANAGEMENTS
DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CANADIAN
SUPPLEMENT(in United States
dollars, unless otherwise indicated, and in accordance with CDN GAAP)

Stock-based compensation

In fiscal 2004, we adopted CICA
3870(See Note 3 to the Notes to the Canadian GAAP Consolidated Financial
Statements), which requires us to expense in the income statement the fair value of stock
options. Under U.S. GAAP, this information need only be presented in the notes to the
financial statements. The impact of this difference was to decrease income before taxes by
$3.6 million and $6.3 million for the three months ended August 31, 2004 and August
31, 2003, respectively, as compared to U.S. GAAP. For the six-month periods ending
August 31, 2004 and August 31, 2003, the impact of this difference was to decrease
income before taxes by $7.3 million and $13.2 million, respectively, as compared to U.S.
GAAP.

Deferred income taxes

The capitalization of in-process
technology created an additional deferred income tax liability on the Canadian GAAP
balance sheet as the capitalization of the in-process technology created a temporary
difference. The amortization of this balance decreased the Canadian GAAP income tax
provision by $0.1 million and $0.2 million for the quarters ended August 31, 2004 and
August 31, 2003, respectively, as compared to U.S. GAAP. For the six-month periods
ended August 31, 2004 and August 31, 2003, the amortization of this balance decreased the
Canadian GAAP income tax provision by $0.2 million and $0.3 million, respectively, as
compared to U.S. GAAP.

The expensing of stock-based
compensation creates a deferred tax asset on the Canadian GAAP financial statements as
this expense is deductible in certain jurisdictions when the options are exercised. Under
U.S. GAAP, the reduction in the tax liability is treated as part of the purchase price
component of the stock options and added to paid-in capital. The expensing of stock-based
compensation reduced the Canadian GAAP tax provision by $0.4 million and $0.8 million in
the three and six-month periods ended August 31, 2004, respectively, as compared to U.S.
GAAP.

72