---

Exhibit 99.1

COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(US$000s except share amounts, CDN GAAP)(Unaudited)

|                                                          |  |                            |   |            |  
|--------------------------------------------------------- |  | -------------------------- | - | ---------- | -
|                                                          |  | Three months ended May 31,
|                                                         
|                                                          |  | 2004                       |   | 2003      
|                                                         
|                                                          |  |                            |   | (restated)
|Revenue                                                   |  |                            |   | Note 3    
|Product license                                           |  | $  66,070                  |   | $  57,801  |  
|Product support                                           |  | 74,787                     |   | 64,127     |  
|Services                                                  |  | 32,762                     |   | 28,635     |  
|                                                         
|Total revenue                                             |  | 173,619                    |   | 150,563    |  
|                                                         
|Cost of revenue                                           | 
|Cost of product license                                   |  | 621                        |   | 1,111      |  
|Cost of product support                                   |  | 7,175                      |   | 6,855      |  
|Cost of services                                          |  | 25,475                     |   | 20,859     |  
|                                                         
|Total cost of revenue                                     |  | 33,271                     |   | 28,825     |  
|                                                         
|Gross margin                                              |  | 140,348                    |   | 121,738    |  
|                                                         
|Operating expenses                                        | 
|Selling, general, and administrative                      |  | 90,509                     |   | 80,238     |  
|Research and development                                  |  | 24,325                     |   | 23,294     |  
|Amortization of stock-based compensation                  |  | 3,651                      |   | 6,855      |  
|Amortization of intangible assets                         |  | 1,622                      |   | 2,594      |  
|Investment tax credits                                    |  | (3,014                     | ) | (2,374     | )
|                                                         
|Total operating expenses                                  |  | 117,093                    |   | 110,607    |  
|                                                         
|Operating income                                          |  | 23,255                     |   | 11,131     |  
|Interest expense                                          |  | (71                        | ) | (171       | )
|Interest income                                           |  | 1,404                      |   | 1,044      |  
|                                                         
|Income before taxes                                       |  | 24,588                     |   | 12,004     |  
|Income tax provision                                      |  | 7,837                      |   | 6,786      |  
|                                                         
|Net income                                                |  | 16,751                     |   | 5,218      |  
|Retained earnings at beginning of the period              |  | 205,768                    |   | 215,714    |  
|Retroactive adjustment due to change in accounting policy |  | --                         |   | (77,770    | )
|Repurchase of shares                                      |  | (9,327                     | ) | --         |  
|                                                         
|Retained earnings at end of the period                    |  | $213,192                   |   | $143,162   |  
|                                                         
|Net income per share                                      | 
|Basic                                                     |  | $0.19                      |   | $0.06      |  
|                                                         
|Diluted                                                   |  | $0.18                      |   | $0.06      |  
|                                                         
|Weighted average number of shares (000s)                  | 
|Basic                                                     |  | 90,091                     |   | 88,527     |  
|                                                         
|Diluted                                                   |  | 92,692                     |   | 90,924     |  
|                                                         

(See accompanying notes)

53

---

COGNOS INCORPORATED 
CONSOLIDATED BALANCE
SHEETS
(US$000s except share
amounts, CDN GAAP)

|                                                            |  |             |   |                  |  
|----------------------------------------------------------- |  | ----------- | - | ---------------- | -
|                                                            |  | May 31,2004 |   | February 29,2004 |  
|                                                           
|Assets                                                      |  | (Unaudited  | ) | (Note 1          | )
|Current assets                                              | 
|Cash and cash equivalents                                   |  | $327,441    |   | $224,830         |  
|Short-term investments                                      |  | 88,921      |   | 163,411          |  
|Accounts receivable                                         |  | 106,431     |   | 152,859          |  
|Prepaid expenses and other current assets                   |  | 15,601      |   | 16,668           |  
|Deferred tax assets                                         |  | 2,032       |   | 2,445            |  
|                                                           
|                                                            |  | 540,426     |   | 560,213          |  
|Fixed assets                                                |  | 68,171      |   | 71,292           |  
|Intangible assets                                           |  | 23,717      |   | 25,269           |  
|Goodwill                                                    |  | 172,323     |   | 172,323          |  
|                                                           
|                                                            |  | $804,637    |   | $829,097         |  
|                                                           
|Liabilities                                                 | 
|Current liabilities                                         | 
|Accounts payable                                            |  | $  23,573   |   | $  30,698        |  
|Accrued charges                                             |  | 22,087      |   | 25,483           |  
|Salaries, commissions, and related items                    |  | 43,360      |   | 59,903           |  
|Income taxes payable                                        |  | 3,550       |   | 5,875            |  
|Deferred revenue                                            |  | 164,620     |   | 178,752          |  
|                                                           
|                                                            |  | 257,190     |   | 300,711          |  
|Deferred income taxes                                       |  | 18,726      |   | 18,730           |  
|                                                           
|                                                            |  | 275,916     |   | 319,441          |  
|                                                           
|Stockholders Equity                                        | 
|Capital stock                                               | 
|Common shares and additional paid-in capital                | 
|(May 31, 2004 - 90,238,463; February 29, 2004 - 89,902,895) |  | 347,976     |   | 339,297          |  
|Treasury shares                                             | 
|(May 31, 2004 - 40,375; February 29, 2004 - 43,500)         |  | (980        | ) | (1,065           | )
|Deferred stock-based compensation                           |  | (28,311     | ) | (32,903          | )
|Retained earnings                                           |  | 213,192     |   | 205,768          |  
|Accumulated other comprehensive loss                        |  | (3,156      | ) | (1,441           | )
|                                                           
|                                                            |  | 528,721     |   | 509,656          |  
|                                                           
|                                                            |  | $804,637    |   | $829,097         |  
|                                                           

(See accompanying notes)

54

---

COGNOS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$000s, CDN GAAP)
(Unaudited)

|                                                                  |  |                            |   |            |  
|----------------------------------------------------------------- |  | -------------------------- | - | ---------- | -
|                                                                  |  | Three months ended May 31,
|                                                                 
|                                                                  |  | 2004                       |   | 2003       |  
|                                                                 
|Cash flows from operating activities                              | 
|Net income                                                        |  | $  16,751                  |   | $    5,218 |  
|Non-cash items                                                    | 
|Depreciation and amortization                                     |  | 6,748                      |   | 7,634      |  
|Amortization of deferred stock-based compensation                 |  | 3,836                      |   | 7,024      |  
|Amortization of other deferred compensation                       |  | 7                          |   | 62         |  
|Deferred income taxes                                             |  | 489                        |   | (3,122     | )
|Loss on disposal of fixed assets                                  |  | 1                          |   | 454        |  
|                                                                 
|                                                                  |  | 27,832                     |   | 17,270     |  
|Change in non-cash working capital                                | 
|Decrease in accounts receivable                                   |  | 44,933                     |   | 37,006     |  
|Decrease (increase) in prepaid expenses and other current assets  |  | 870                        |   | (3,088     | )
|Decrease in accounts payable                                      |  | (6,967                     | ) | (8,625     | )
|Decrease in accrued charges                                       |  | (3,195                     | ) | (5,809     | )
|Decrease in salaries, commissions, and related items              |  | (15,743                    | ) | (15,793    | )
|Decrease in income taxes payable                                  |  | (2,092                     | ) | (138       | )
|Decrease in deferred revenue                                      |  | (12,549                    | ) | (10,282    | )
|                                                                 
|Net cash provided by operating activities                         |  | 33,089                     |   | 10,541     |  
|                                                                 
|Cash flows from investing activities                              | 
|Maturity of short-term investments                                |  | 145,593                    |   | 63,752     |  
|Purchase of short-term investments                                |  | (71,395                    | ) | (44,700    | )
|Additions to fixed assets                                         |  | (3,073                     | ) | (6,409     | )
|Additions to intangible assets                                    |  | (69                        | ) | (321       | )
|Business acquisitions                                             |  | --                         |   | (108       | )
|                                                                 
|Net cash provided by investing activities                         |  | 71,056                     |   | 12,214     |  
|                                                                 
|Cash flows from financing activities                              | 
|Issue of common shares                                            |  | 10,289                     |   | 12,466     |  
|Purchase of treasury shares                                       |  | --                         |   | (564       | )
|Repurchase of shares                                              |  | (9,989                     | ) | --         |  
|Decrease in long-term-debt and long-term liabilities              |  | --                         |   | (1,697     | )
|                                                                 
|Net cash provided by financing activities                         |  | 300                        |   | 10,205     |  
|                                                                 
|Effect of exchange rate changes on cash                           |  | (1,834                     | ) | 5,122      |  
|                                                                 
|Net increase in cash and cash equivalents                         |  | 102,611                    |   | 38,082     |  
|Cash and cash equivalents, beginning of period                    |  | 224,830                    |   | 162,588    |  
|                                                                 
|Cash and cash equivalents, end of period                          |  | 327,441                    |   | 200,670    |  
|Short-term investments, end of period                             |  | 88,921                     |   | 63,226     |  
|                                                                 
|Cash, cash equivalents, and short-term investments, end of period |  | $416,362                   |   | $263,896   |  
|                                                                 

(See accompanying notes)

55

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

|1. | Basis of Presentation
|-- | ---------------------

| | The
accompanying unaudited consolidated financial statements have been prepared by the
Corporation in United States (U.S.) dollars and in accordance with Canadian
generally accepted accounting principles (GAAP) with respect to interim
financial statements applied on a consistent basis. The consolidated balance sheet as at
February 29, 2004 has been extracted from the audited consolidated financial statements
at that date. These consolidated financial statements do not include all of
the information and footnotes required in the preparation of annual consolidated
financial statements. These unaudited condensed notes to the consolidated financial
statements should be read in conjunction with the audited financial statements and notes
included in the Corporations Annual Information Form for the fiscal year ended
February 29, 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
preparation of these unaudited consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and the accompanying notes. In the opinion of management, these
unaudited consolidated financial statements reflect all adjustments (which include only
normal, recurring adjustments) necessary to state fairly the results for the periods
presented. Actual results could differ from these estimates and the operating results for
the interim periods presented are not necessarily indicative of the results expected for
the full year.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
information is presented in U.S. dollars, unless otherwise stated. Consolidated financial
statements prepared in accordance with U.S. GAAP, in U.S. dollars, are made available to
all shareholders, and filed with various regulatory authorities.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Revenue
Recognition
|-- |  | -------------------

| | The
Corporation recognizes revenue in accordance with Statement of Position (SOP)
97-2, Software Revenue Recognition, issued by the American Institute of Certified Public
Accountants.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Substantially
all of the Corporations product license revenue is earned from licenses of
off-the-shelf software requiring no customization. Revenue from these licenses is
recognized when all of the following criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectibility is probable. If a license includes the right to return the product for
refund or credit, revenue is deferred, until the right of return lapses.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
from product support contracts is recognized ratably over the life of the contract.
Incremental costs directly attributable to the acquisition of product support contracts,
and that would not have been incurred but for the acquisition of that contract, are
deferred and expensed in the period the related revenue is recognized. These costs
include commissions payable on sales of support contracts.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

56

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

| | Services
revenue from education, consulting, and other services is recognized at the time such
services are rendered. Many of the Corporations sales include both software and
services. Where the service is (1) not essential to the functionality of any other
element of the transaction and (2) stated separately such that the total price of the
arrangement is expected to vary as a result of the inclusion or exclusion of the service,
the software element is accounted for separately from the service element. Where these
two criteria are not met, the entire arrangement is accounted for using the percentage of
completion method in accordance with SOP 81-1, Accounting for Performance of Construction
Type and Certain Production Type Contracts.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
contracts with multiple obligations (e.g., delivered and undelivered products, support
obligations, education, consulting, and other services), the Corporation allocates
revenue to the undelivered items of the contract based on objective and reliable evidence
of their fair value. Fair value is assigned to the delivered item using the residual
method as outlined in Emerging Issues Committee Abstract 142, Revenue Arrangement with
Multiple Deliverables. Under the residual method, the amount of consideration allocated
to the delivered item equals the total arrangement consideration less the fair value of
the undelivered items. Objective and reliable evidence of the fair value of product
support elements is the renewal rate for such contracts and, for service elements, is the
normal pricing and discounting practices for those products when they are sold
separately; the residual is then assigned to the license element of the contract.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Changes
in Accounting Policy
|-- |  | ----------------------------

| | In
the fourth quarter of fiscal 2004, the Corporation adopted CICA Handbook section 3870,
Stock-based Compensation and Other Stock-based payments, (CICA 3870) which
requires the fair value based method of accounting for all stock-based compensation
earned during the year. Under this method, the fair value of options is estimated on the
date of grant and is recognized as compensation expense over the vesting period of the
options. The discount offered to employees under a stock purchase plan is also included
as a compensation expense. Prior to fiscal 2004, the Corporation accounted for all grants
of options to directors and employees in accordance with the intrinsic value method of
accounting for stock-based compensation which requires a compensation expense to be
recorded if the exercise price of each option was less than the fair market value on the
date immediately preceding the date of grant. This change was applied retroactively
effective March 1, 2003 to all stock options outstanding at March 1, 2000. The results of
operations for the three month period ended May 31, 2003 have been restated and an
adjustment to the opening balance of retained earnings at March 1, 2003 has been made to
reflect the cumulative effect of the change on prior periods. This is in accordance with
the transitional provisions of CICA 3870. The effect of this change was to decrease net
earnings by $3,651,000 or $0.04 per share for the three month period ended May 31, 2004
and by $6,855,000 or $0.08 per share for the three month period ended May 31, 2003. The
opening retained earnings at March 1, 2003 has been reduced by $77,770,000 due to this
change in accounting policy.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

The fair value of the options was
estimated at the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:

|                                 |  |                           |   |      |  
|-------------------------------- |  | ------------------------- | - | ---- | -
|                                 |  | Three months endedMay 31, |  
|                                
|                                 |  | 2004                      |   | 2003 |  
|                                
|Risk-free interest rates         |  | 3.6                       | % | N/A  | *
|Expected volatility              |  | 52                        | % | N/A  | *
|Dividend yield                   |  | 0                         | % | N/A  | *
|Expected life of options (years) |  | 4.3                       |   | N/A  | *

| |  |  |  | 
| |  |  |  | 

* During the three months ended May
31, 2003, no options were granted.

|4. |  | Goodwill
|-- |  | --------

| | During
the three months ended May 31, 2004 and May 31, 2003, there were additions to goodwill of
nil and $108,000, respectively. The additions in the prior fiscal period related to
additional consideration paid to the former shareholders of Teijin Cognos Incorporated (TCI).
This additional consideration was based on the net revenue of TCI during the quarter as
per the terms of the original purchase agreement. The Corporation has designated the
beginning of its fiscal year as the date for the annual impairment test, and performed
the required test as of March 1, 2004. Based on this test, goodwill is not considered to
be impaired.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |                           |      |          | 
|----------------- |  | ------------------------- | ---- | -------- | 
|                  |  | Three months endedMay 31,
|                 
|                  |  | 2004                      | 2003
|                 
|                  |  | ($000s)                  
|Beginning balance |  | $172,323                  |      | $169,991 | 
|Additions         |  | --                        |      | 108      | 
|                 
|Closing balance   |  | $172,323                  |      | $170,099 | 
|                 

58

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

|5. |  | Intangible
Assets
|-- |  | -----------------

|                          |  | As at May 31,2004 |   | As at February 29,2004  
|------------------------- |  | ----------------- | - | ------------------------
|                         
|                          |  | Cost              |   | Accumulated Amortization
|                         
|                          |  | ($000s)           |   | ($000s)                 
|Acquired Technology       |  | $ 33,381          |   | $19,146                 
|In-process technology     |  | 38,400            |   | 37,024                  
|Deferred compensation     |  | 8,945             |   | 8,945                   
|Contractual relationships |  | 7,800             |   | 1,353                   
|Trademarks and patents    |  | 3,690             |   | 2,031                   
|                          |  |                   |   |                         
|                          |  | 92,216            |   | $68,499                 
|                          |  |                   |   |                         
|                          |  | (68,499           | ) |                         
|                          |  |                   |   |                         
|Net book value            |  | $ 23,717          |   |                         
|                          |  |                   |   |                         

| | Amortization
of intangible assets was $1,622,000 and $2,594,000 in the quarters ended May 31, 2004 and
May 31, 2003, respectively. The estimated amortization expense related to intangible
assets is as follows ($000s):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | 
|------------------- | 
|                    | 
|2005 (Q2 to Q4)     | 
|2006                | 
|2007                | 
|2008                | 
|2009                | 
|2010                | 
|2011 and thereafter | 

59

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

|6. |  | Commitments
and Contingencies
|-- |  | -----------------------------

| | Customer
Indemnification
| | ------------------------

| | The
Corporation has entered into licensing agreements with customers that include limited
intellectual property indemnification clauses. These clauses are typical in the software
industry and require the Corporation to compensate the customer for certain liabilities
and damages incurred as a result of third party intellectual property claims arising from
these transactions. The Corporation has not made any significant indemnification payments
as a result of these clauses and, in accordance with Accounting Standards Boards
Accounting Guideline (AcG) No. 14 Disclosure of Guarantees, has not accrued
any amounts in relation to these indemnification clauses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Legal
Proceedings
| | -----------------

| | The
Corporation and its subsidiaries may, from time to time, be involved in legal
proceedings, claims, and litigation that arise in the ordinary course of business. In the
event that any such claims or litigation are resolved against Cognos, such outcomes or
resolutions could have a material adverse effect on the business, financial condition or
results of operations of the Corporation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. |  | Income
Taxes
|-- |  | ------------

| | The
Corporation provides for income taxes in its quarterly unaudited financial statements
based on the estimated effective tax rate for the full fiscal year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. |  | Stockholders Equity
|-- |  | --------------------

| | The
Corporation issued 635,000 common shares, valued at $10.2 million during the three months
ended May 31, 2004, and issued 866,000 shares valued at $12.5 million during the three
months ended May 31, 2003. The issuance of shares in both periods was pursuant to the
Corporations stock purchase plan and the exercise of stock options by employees and
officers. The Corporation repurchased 300,000 shares in the open market at a value of $10.0 million during
the three months ended May 31, 2004. During the three-month period ended May 31,
2003, the Corporation did not repurchase shares.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

60

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

| | Net
Income per Share
| | --------------------

| | The
reconciliation of the numerator and denominator for the calculation of basic and diluted
net income per share is as follows: (000s except per share amounts)
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       |  |                           |  |          | 
|------------------------------------------------------ |  | ------------------------- |  | -------- | 
|                                                       |  | Three months endedMay 31, | 
|                                                      
|                                                       |  | 2004                      |  | 2003     | 
|                                                      
|Basic Net Income per Share                             | 
|Net income                                             |  | $16,751                   |  | $  5,218 | 
|                                                      
|Weighted average number of shares outstanding          |  | 90,091                    |  | 88,527   | 
|                                                      
|Basic net income per share                             |  | $0.19                     |  | $0.06    | 
|                                                      
|Diluted Net Income per Share                           | 
|Net income                                             |  | $16,751                   |  | $  5,218 | 
|                                                      
|Weighted average number of shares outstanding          |  | 90,091                    |  | 88,527   | 
|Dilutive effect of stock options                       |  | 2,601                     |  | 2,397    | 
|                                                      
|Adjusted weighted average number of shares outstanding |  | 92,692                    |  | 90,924   | 
|                                                      
|Diluted net income per share                           |  | $0.18                     |  | $0.06    | 
|                                                      

|9. |  | Comprehensive
Income
|-- |  | --------------------

| | Comprehensive
income includes net income and other comprehensive income (OCI). OCI refers
to changes in net assets from transactions and other events, and circumstances not
included in net income and other than transactions with stockholders. These changes are
recorded directly as a separate component of Stockholders Equity. The only other
comprehensive income item for the Corporation relates to foreign currency translation
adjustments pertaining to those subsidiaries not using the U.S. dollar as their
functional currency net of derivative gains or losses. For Canadian GAAP, this would be
referred to as the currency translation account.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

61

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

| | The
components of comprehensive income were as follows ($000s):
| | ----------------------------------------------------------------

|                                         |  |                            |   |          | 
|---------------------------------------- |  | -------------------------- | - | -------- | 
|                                         |  | Three months ended May 31, |  
|                                        
|                                         |  | 2004                       |   | 2003     | 
|                                        
|Net income                               |  | $16,751                    |   | $  5,218 | 
|Other comprehensive income (loss):       | 
|Foreign currency translation adjustments |  | (1,715                     | ) | 6,045    | 
|                                        
|Comprehensive income                     |  | $15,036                    |   | $11,263  | 
|                                        

|10. |  | Segmented
Information
|--- |  | ---------------------

| | The
Corporation operates in one business segmentcomputer software solutions.
| | -----------------------------------------------------------------------------

|11. |  | Liabilities
in Connection with Acquisition
|--- |  | ------------------------------------------

| | The
Corporation undertook a restructuring plan in conjunction with the acquisition of Adaytum
in January 2003. In accordance with Emerging Issues Committee (EIC) No. 42,
Costs Incurred On Business Combinations(EIC 42), the liability associated
with this restructuring is considered a liability assumed in the purchase price
allocation. The Corporation recorded restructuring costs of approximately $9.2 million in
relation to this restructuring plan. These restructuring costs primarily relate to
involuntary employee separations of approximately 90 employees of Adaytum, accruals for
vacating leased premises of Adaytum, and related write-downs of leasehold improvements as
well as asset write-downs of Adaytum. The employee separations impact all functional
groups and geographic regions of Adaytum. The remaining accrual is included on the
balance sheet as accrued charges and salaries, commissions, and related items. All
amounts excluding lease payments are expected to be paid in fiscal 2005. Outstanding
balances for lease payments will be paid over the lease term unless settled earlier. The
Corporation does not believe that any unresolved contingencies, purchase price allocation
issues, or additional liabilities exist that would result in a material adjustment to the
acquisition cost allocation.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

62

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. dollars, unless otherwise stated)
(In accordance with CDN GAAP

| | The
following table sets forth the activity in the Corporations restructuring accrual
for the three month period ended May 31, 2004: ($000s)
| | ---------------------------------------------------------------------------------------------------------------------------------------------

|                                |  | Employeeseparations | Otherrestructuringaccruals | Totalaccrual
|------------------------------- |  | ------------------- | -------------------------- | ------------
|                               
|Balance as at February 29, 2004 |  | $ 945               |                            | $3,498      
|Cash payments during the        | 
|first quarter of fiscal 2005    |  | (563                | )                          | (183        
|                               
|Balance as at May 31, 2004      |  | $ 382               |                            | $3,315      
|                               

|12. |  | Comparative
Results
|--- |  | -------------------

| | Certain
of the prior periods figures have been reclassified in order to conform to the
presentation adopted during the current fiscal year. This change in presentation does not
affect previously reported assets, liabilities, or results of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13. |  | New
Accounting Pronouncements
|--- |  | -----------------------------

| | During
October 2003, CICA Handbook section 1100, Generally Accepted Accounting Principles(CICA
1100), was issued and is effective for the Corporations fiscal year beginning
March 1, 2004. CICA 1100 establishes standards for financial reporting in accordance with
generally accepted accounting principles and clarifies the relative authority of various
accounting pronouncements and other sources within GAAP. The adoption of CICA 1100 did
not have a material impact on the Corporations financial condition or results of
operations.
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| | In
June 2003, the CICA issued Accounting Guideline No.15, Consolidation of Variable Interest
Entities(AcG-15). AcG-15 requires the primary beneficiary of a variable
interest entity to consolidate the variable interest entity. A variable interest entity
is any legal structure used for business purposes that either (a) does not have equity
investors or has equity investors that lack characteristics of control; or (b) the equity
investment at risk does not provide sufficient financial resources for the entity to
support its activities. AcG 15 is effective for reporting periods beginning on or after
November 1, 2004 but may be adopted beforehand. The Corporation has determined that it
has an undercapitalized distributor that qualifies as a variable interest entity. The
Corporation adopted AcG 15 on May 31, 2004 and its adoption did not have a material
impact on the Corporations financial condition or results of operations.
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