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Exhibit 99.1

COGNOS INCORPORATEDMANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS-CANADIAN
SUPPLEMENT(in U.S. 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), and the audited Consolidated Financial
Statements and Notes included in our Annual Information Form for the fiscal year ended
February 28, 2005.

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 estimates listed in the MD&A, we also use the following for Canadian GAAP
purposes:

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

We apply CICA Handbook section 3870,
Stock-based Compensation and Other Stock-based payments, in accounting for our stock
option, stock purchase, and restricted share unit plans. Compensation expense for options
granted and shares issued under our stock option and restricted share unit plans is
recognized over their vesting period using the fair value method of accounting for
stock-based compensation. For purposes of computing the stock-based compensation, the fair
value of the options granted during the three and six month periods ended August 31, 2005
was estimated at the date of grant using a binomial lattice option-pricing model. Prior to
March 1, 2005, we used the Black-Scholes option-pricing model to estimate the fair value
of options at the grant date. 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 our stock purchase plan is also recognized as a compensation
expense in the period when the shares are purchased.

85

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Exhibit 99.1

COGNOS INCORPORATEDMANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS-CANADIAN
SUPPLEMENT(in U.S. dollars, unless otherwise indicated, and in accordance
with CDN GAAP)

RESULTS OF OPERATIONS

|                                             |  | Three months endedAugust 31, | Six months endedAugust 31,
|-------------------------------------------- |  | ---------------------------- | --------------------------
|                                            
|                                             |  | 2005                         | 2004                      
|                                            
|Income before taxes  U.S. GAAP              |  | $35,972                      |                           
|Income before taxes  Canadian GAAP          |  | $35,594                      |                           
|                                             | 
|Income tax provision  U.S. GAAP             |  | $  7,253                     |                           
|Income tax provision  Canadian GAAP         |  | $10,844                      |                           
|                                             | 
|Net income per share diluted  U.S. GAAP     |  | $0.31                        |                           
|Net income per share diluted  Canadian GAAP |  | $0.27                        |                           

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 for both the three months ended August 31, 2005
and August 31, 2004, respectively, as compared to U.S. GAAP. For the six-month
periods ending August 31, 2005 and August 31, 2004, the impact of this difference was to
decrease income before taxes by $0.5 million, as compared to U.S. GAAP.

Stock-based compensationUnder U.S. GAAP, companies may choose
between the intrinsic value method and fair value method of accounting for stock-based
compensation. We have elected to account for stock-based compensation using the intrinsic
value method in accordance with APB 25 and to disclose the pro forma effect of recording
compensation expense under the fair value method. This disclosure can be found in Note 3
to the unaudited consolidated financial statements. For Canadian GAAP purposes, companies
are required to use the fair value method of accounting for stock-based compensation. The
impact of this difference for the three months ended August 31, 2005 and August 31, 2004
was to decrease income before taxes by $4.4 million and $3.6 million respectively. For the
six month periods ending August 31, 2005 and August 31, 2004, the impact of this
difference was to decrease income before taxes by $8.3 million and $7.3 million,
respectively, as compared to U.S. GAAP.

86

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Exhibit 99.1

COGNOS INCORPORATEDMANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS-CANADIAN
SUPPLEMENT(in U.S. dollars, unless otherwise indicated, and in accordance
with CDN GAAP)

Investment tax creditsCanadian 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 $4.3 million and $4.6 million for the
three months ended August 31, 2005 and August 31, 2004, respectively, as compared to
U.S. GAAP. For the six-month periods ended August 31, 2005 and August 31, 2004, the
impact of this difference was to increase income before taxes and the income tax provision
by $9.8 million and $7.6 million, respectively, as compared to U.S. GAAP.

Deferred income taxesThe 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 for both the quarters ended August 31, 2005 and August
31, 2004, respectively, as compared to U.S. GAAP. For the six-month periods ended
August 31, 2005 and August 31, 2004, the amortization of this balance decreased the
Canadian GAAP income tax provision by $0.2 million, as compared to U.S. GAAP.

The expensing of stock-based
compensation creates a deferred tax asset for Canadian GAAP purposes 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 $0.6 million and $0.4 million in the three
month periods ended August 31, 2005 and August 31, 2004, respectively, as compared to U.S.
GAAP. For the six months ended August 31, 2005 and August 31, 2004, the reduction in the
tax provision was $1.0 million and $0.9 million, respectively.

Derivative financial instrumentsUnder Canadian GAAP, derivative
financial instruments that qualify for hedge accounting treatment may be recognized on the
balance sheet only to the extent that cash has been paid and or received together with
adjustments necessary to offset recognized gains or losses arising on the hedged items.
Under U.S. GAAP, such derivative financial instruments are recognized on the balance sheet
at fair value with a corresponding charge or credit recorded in other comprehensive income
(OCI) for any portion not recognized in income. At August 31, 2005 and
February 28, 2005, there was $1.2 million and $0.3 million, respectively, included in
OCI related to the net unrealized loss on the Corporations cash flow hedges. For
Canadian GAAP, this amount was removed and applied against the accrued liability related
to the hedge.

87