---

Exhibit 99.1

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

|                                                          |  | Three months endedAugust 31, |   | Six months endedAugust 31, |  
|--------------------------------------------------------- |  | ---------------------------- | - | -------------------------- | -
|                                                         
|                                                          |  | 2004                         |   | 2003                       |  
|                                                         
|                                                          |  |                              |   | (restated)Note 3           |  
|Revenue                                                   |  |                              |   |                            |  
|Product license                                           |  | $   75,362                   |   | $   62,234                 |  
|Product support                                           |  | 76,156                       |   | 66,162                     |  
|Services                                                  |  | 33,702                       |   | 29,785                     |  
|                                                         
|Total revenue                                             |  | 185,220                      |   | 158,181                    |  
|                                                         
|Cost of revenue                                           | 
|Cost of product license                                   |  | 546                          |   | 1,106                      |  
|Cost of product support                                   |  | 7,074                        |   | 6,887                      |  
|Cost of services                                          |  | 27,457                       |   | 21,503                     |  
|                                                         
|Total cost of revenue                                     |  | 35,077                       |   | 29,496                     |  
|                                                         
|Gross margin                                              |  | 150,143                      |   | 128,685                    |  
|                                                         
|Operating expenses                                        | 
|Selling, general, and administrative                      |  | 90,230                       |   | 81,495                     |  
|Research and development                                  |  | 25,382                       |   | 21,714                     |  
|Amortization of stock based compensation                  |  | 3,635                        |   | 6,314                      |  
|Amortization of intangible assets                         |  | 1,619                        |   | 2,476                      |  
|Investment tax credits                                    |  | (4,580                       | ) | (4,881                     | )
|                                                         
|Total operating expenses                                  |  | 116,286                      |   | 107,118                    |  
|                                                         
|Operating income                                          |  | 33,857                       |   | 21,567                     |  
|Interest expense                                          |  | (8                           | ) | (154                       | )
|Interest income                                           |  | 1,781                        |   | 1,543                      |  
|                                                         
|Income before taxes                                       |  | 35,630                       |   | 22,956                     |  
|Income tax provision                                      |  | 11,389                       |   | 11,428                     |  
|                                                         
|Net income                                                |  | $   24,241                   |   | $   11,528                 |  
|Retained earnings at beginning of the period              |  | 213,192                      |   | 227,787                    |  
|Retroactive adjustment due to change in accounting policy |  | --                           |   | (84,625                    | )
|Repurchase of shares                                      |  | (9,188                       | ) | --                         |  
|                                                         
|Retained earnings at end of the period                    |  | $ 228,245                    |   | $ 154,690                  |  
|                                                         
|Net income per share                                      | 
|Basic                                                     |  | $0.27                        |   | $0.13                      |  
|                                                         
|Diluted                                                   |  | $0.26                        |   | $0.13                      |  
|                                                         
|Weighted average number of shares (000s)                  |  |                              |   |                            |  
|Basic                                                     |  | 90,382                       |   | 89,181                     |  
|                                                         
|Diluted                                                   |  | 92,849                       |   | 91,806                     |  
|                                                         

(See accompanying notes)

58

---

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

|                                                               |  | August 31,2004 |   | February 29,2004 |  
|-------------------------------------------------------------- |  | -------------- | - | ---------------- | -
|                                                              
|Assets                                                         |  | (Unaudited)    |   | (Note 1)         |  
|Current assets                                                 |  |                |   |                  |  
|                                                               |  |                |   |                  |  
|Cash and cash equivalents                                      |  | $ 364,782      |   | $ 224,830        |  
|Short-term investments                                         |  | 75,628         |   | 163,411          |  
|Accounts receivable                                            |  | 114,824        |   | 152,859          |  
|Prepaid expenses and other current assets                      |  | 16,495         |   | 16,668           |  
|Deferred tax assets                                            |  | 1,815          |   | 2,445            |  
|                                                              
|                                                               |  | 573,544        |   | 560,213          |  
|Fixed assets                                                   |  | 69,048         |   | 71,292           |  
|Intangible assets                                              |  | 22,557         |   | 25,269           |  
|Goodwill                                                       |  | 172,323        |   | 172,323          |  
|                                                              
|                                                               |  | $ 837,472      |   | $ 829,097        |  
|                                                              
|Liabilities                                                    | 
|Current liabilities                                            | 
|Accounts payable                                               |  | $   23,741     |   | $   30,698       |  
|Accrued charges                                                |  | 23,349         |   | 25,483           |  
|Salaries, commissions, and related items                       |  | 52,231         |   | 59,903           |  
|Income taxes payable                                           |  | 5,550          |   | 5,875            |  
|Deferred revenue                                               |  | 155,759        |   | 178,752          |  
|                                                              
|                                                               |  | 260,630        |   | 300,711          |  
|Deferred income taxes                                          |  | 19,861         |   | 18,730           |  
|                                                              
|                                                               |  | 280,491        |   | 319,441          |  
|                                                              
|Stockholders' Equity                                           | 
|Capital stock                                                  | 
|Common shares and additional paid-in capital                   | 
|(August 31, 2004 - 90,417,883; February 29, 2004 - 89,902,895) |  | 379,843        |   | 339,297          |  
|Treasury shares                                                | 
|(August 31, 2004 - 46,375; February 29, 2004 - 43,500)         |  | (1,199         | ) | (1,065           | )
|Deferred stock-based compensation                              |  | (48,134        | ) | (32,903          | )
|Retained earnings                                              |  | 228,245        |   | 205,768          |  
|Accumulated other comprehensive loss                           |  | (1,774         | ) | (1,441           | )
|                                                              
|                                                               |  | 556,981        |   | 509,656          |  
|                                                              
|                                                               |  | $ 837,472      |   | $ 829,097        |  
|                                                              

(See accompanying notes)

59

---

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

|                                                                  |  | Three months endedAugust 31, |   | Six months endedAugust 31, |  
|----------------------------------------------------------------- |  | ---------------------------- | - | -------------------------- | -
|                                                                 
|                                                                  |  | 2004                         |   | 2003                       |  
|                                                                 
|Cash flows from operating activities                              |  |                              |   |                            |  
|Net income                                                        |  | $   24,241                   |   | $   11,528                 |  
|Non-cash items                                                    | 
|Depreciation and amortization                                     |  | 6,754                        |   | 7,804                      |  
|Amortization of deferred stock-based compensation                 |  | 3,855                        |   | 6,535                      |  
|Amortization of other deferred compensation                       |  | --                           |   | 62                         |  
|Deferred income taxes                                             |  | 758                          |   | 6,837                      |  
|Loss on disposal of fixed assets                                  |  | 123                          |   | 9                          |  
|                                                                 
|                                                                  |  | 35,731                       |   | 32,775                     |  
|Change in non-cash working capital                                | 
|Decrease (increase) in accounts receivable                        |  | (8,472                       | ) | (5,109                     | )
|Decrease (increase) in prepaid expenses and other current assets  |  | (699                         | ) | (772                       | )
|Decrease in accounts payable                                      |  | (18                          | ) | (2,153                     | )
|Increase (decrease) in accrued charges                            |  | 1,298                        |   | (1,263                     | )
|Increase (decrease) in salaries, commissions, and related items   |  | 8,468                        |   | 2,005                      |  
|Increase (decrease) in income taxes payable                       |  | 2,048                        |   | 1,297                      |  
|Decrease in deferred revenue                                      |  | (8,942                       | ) | (5,069                     | )
|                                                                 
|Net cash provided by operating activities                         |  | 29,414                       |   | 21,711                     |  
|                                                                 
|Cash flows from investing activities                              | 
|Maturity of short-term investments                                |  | 99,081                       |   | 53,058                     |  
|Purchase of short-term investments                                |  | (85,566                      | ) | (88,339                    | )
|Additions to fixed assets                                         |  | (4,637                       | ) | (5,089                     | )
|Additions to intangible assets                                    |  | (460                         | ) | (365                       | )
|Business acquisition                                              |  | --                           |   | (122                       | )
|                                                                 
|Net cash provided by (used in) investing activities               |  | 8,418                        |   | (40,857                    | )
|                                                                 
|Cash flows from financing activities                              | 
|Issue of common shares                                            |  | 8,983                        |   | 5,643                      |  
|Purchase of treasury shares                                       |  | (335                         | ) | --                         |  
|Repurchase of shares                                              |  | (9,866                       | ) | --                         |  
|Decrease in long-term debt and long-term liabilities              |  | --                           |   | --                         |  
|                                                                 
|Net cash provided by (used in) financing activities               |  | (1,218                       | ) | 5,643                      |  
|                                                                 
|Effect of exchange rate changes on cash                           |  | 727                          |   | (985                       | )
|                                                                 
|Net increase (decrease) in cash and cash equivalents              |  | 37,341                       |   | (14,488                    | )
|Cash and cash equivalents, beginning of period                    |  | 327,441                      |   | 200,670                    |  
|                                                                 
|Cash and cash equivalents, end of period                          |  | 364,782                      |   | 186,182                    |  
|Short-term investments, end of period                             |  | 75,628                       |   | 98,260                     |  
|                                                                 
|Cash, cash equivalents, and short-term investments, end of period |  | $ 440,410                    |   | $ 284,442                  |  
|                                                                 

(See accompanying notes)

60

---

COGNOS INCORPORATEDCONDENSED 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 RevenueRecognition, 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

61

---

COGNOS INCORPORATEDCONDENSED 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 TypeContracts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, RevenueArrangement
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-basedCompensation 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. For stock purchase plans, the discount offered to employees is also considered
as compensation expense and deducted from income. 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 and six-month periods ended
August 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 $3,635,000 or $0.04 per share and
by $6,314,000 or $0.07 per share for the three-month periods ended August 31, 2004 and
August 31, 2003, respectively. For the six-month periods ended August 31, 2004 and August
31, 2003, net earnings decreased by $7,286,000 or $0.08 per share and by $13,169,000 or
$0.14 per share, respectively, due to this change. The opening retained earnings at March
1, 2003 and June 1, 2003 have been reduced by $77,770,000 and $84,625,000, respectively,
due to this change in accounting policy.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

62

---

COGNOS INCORPORATEDCONDENSED 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 endedAugust 31, |   | Six months endedAugust 31, |  
| | -------------------------------- |  | ---------------------------- | - | -------------------------- | -
| |                                 
| |                                  |  | 2004                         |   | 2003                       |  
| |                                 
| | Risk-free interest rates         |  | 3.2                          | % | 2.9                        | %
| | Expected volatility              |  | 51.0                         | % | 57.2                       | %
| | Dividend yield                   |  | 0.0                          | % | 0.0                        | %
| | Expected life of options (years) |  | 4.3                          |   | 4.3                        |  

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

| | During
the three and six months ended August 31, 2004, there were no additions to goodwill.
During the three and six months ended August 31, 2003, there were additions to goodwill
of $122,000 and $230,000, respectively. The additions during the three and six months
ended August 31, 2003 were 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 each 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 endedAugust 31, |  | Six months endedAugust 31, | 
| | ----------------- |  | ---------------------------- |  | -------------------------- | 
| |                  
| |                   |  | 2004                         |  | 2003                       | 
| |                  
| |                   |  | ($000s)                      |  | ($000s)                    | 
| | Beginning balance |  | $172,323                     |  | $170,099                   | 
| | Additions         |  | --                           |  | 122                        | 
| |                  
| | Closing balance   |  | $172,323                     |  | $170,221                   | 
| |                  

63

---

COGNOS INCORPORATEDCONDENSED 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 August 31,2004 |                          | As at February 29,2004 |                          |                   |   |         |  |              |  
| |                          
| |                           |  | Cost                 | Accumulated Amortization | Cost                   | Accumulated Amortization | Amortization Rate
| |                          
| |                           |  | ($000s)              |                          | ($000s)                |                          |                   |   |         |  |              |  
| |                           |  |                      |                          |                        |                          |                   |   |         |  |              |  
| | Acquired technology       |  | $ 33,381             |                          | $20,131                |                          | $ 33,381          |   | $18,161 |  | 20           | %
| | In-process technology     |  | 38,400               |                          | 37,274                 |                          | 38,400            |   | 36,774  |  | 20           | %
| |                           |  |                      |                          |                        |                          |                   |   |         |  | Compensation
| | Deferred compensation     |  | 8,945                |                          | 8,945                  |                          | 8,945             |   | 8,938   |  | Period      
| | Contractual relationships |  | 7,800                |                          | 1,597                  |                          | 7,800             |   | 1,109   |  | 12.5         | %
| | Trademarks and patents    |  | 4,149                |                          | 2,171                  |                          | 3,620             |   | 1,895   |  | 20           | %
| |                           |  |                      |                          |                        |                          |                   |   |         | 
| |                           |  | 92,675               |                          | $70,118                |                          | 92,146            |   | $66,877 | 
| |                           |  |                      |                          |                        |                          |                   |   |         | 
| |                           |  | (70,118              | )                        |                        |                          | (66,877           | )
| |                           |  |                      |                          |                        |                          |                   |   |         | 
| | Net book value            |  | $ 22,557             |                          |                        |                          | $ 25,269          |  
| |                           |  |                      |                          |                        |                          |                   |   |         | 

| | Amortization
of intangible assets was $1,619,000 and $2,476,000 in the quarters ended August 31, 2004
and August 31, 2003, respectively, and was $3,241,000 and $5,070,000 in the six months
ended August 31, 2004 and August 31, 2003, respectively. The estimated amortization
expense related to intangible assets is as follows ($000s):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2005 (Q3 to Q4)     |  | $3,271 | 
| | ------------------- |  | ------ | 
| | 2006                |  | 6,083  | 
| | 2007                |  | 5,431  | 
| | 2008                |  | 4,734  | 
| | 2009                |  | 1,207  | 
| | 2010                |  | 990    | 
| | 2011 and thereafter |  | 841    | 

64

---

COGNOS INCORPORATEDCONDENSED 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 467,000 common shares for $9.0 million, and 360,000 common shares for
$5.6 million during the quarters ended August 31, 2004, and August 31, 2003,
respectively. The Corporation issued 1,102,000 common shares for $19.2 million and
1,226,000 common shares for $18.1 million during the six months ended August 31, 2004,
and August 31, 2003, respectively. The issuance of shares in all periods was pursuant to
the Corporations stock purchase plan and the exercise of stock options by employees
and officers.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three months ended August 31, 2004, the Corporation repurchased 287,000 shares in the
open market at a value of $9.9 million under its share repurchase program and 10,000
shares at a value of $0.3 million under its restricted share unit plan. During the six
months ended August 31, 2004, the Corporation repurchased 587,000 shares in the open
market at a value of $19.9 million under its share repurchase program and 10,000 shares
at a value of $0.3 million under its restricted share unit plan. During the three months
ended August 31, 2003, the Corporation did not repurchase shares and, during the
six-month period ended August 31, 2003, the Corporation repurchased 21,000 shares at a
value of $0.6 million under the Corporations restricted share unit plan.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

65

---

COGNOS INCORPORATEDCONDENSED 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 endedAugust 31, |  | Six months endedAugust 31, | 
| | ------------------------------------------------------ |  | ---------------------------- |  | -------------------------- | 
| |                                                       
| |                                                        |  | 2004                         |  | 2003                       | 
| |                                                       
| | Basic Net Income per Share                             |  |                              |  |                            | 
| | Net income                                             |  | $24,241                      |  | $11,528                    | 
| |                                                       
| | Weighted average number of shares outstanding          |  | 90,382                       |  | 89,181                     | 
| |                                                       
| | Basic net income per share                             |  | $0.27                        |  | $0.13                      | 
| |                                                       
| | Diluted Net Income per Share                           | 
| | Net income                                             |  | $24,241                      |  | $11,528                    | 
| |                                                       
| | Weighted average number of shares outstanding          |  | 90,382                       |  | 89,181                     | 
| | Dilutive effect of stock options                       |  | 2,467                        |  | 2,625                      | 
| |                                                       
| | Adjusted weighted average number of shares outstanding |  | 92,849                       |  | 91,806                     | 
| |                                                       
| | Diluted net income per share                           |  | $0.26                        |  | $0.13                      | 
| |                                                       

|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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

66

---

COGNOS INCORPORATEDCONDENSED 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 endedAugust 31, |  | Six months endedAugust 31, | 
| | ---------------------------------------- |  | ---------------------------- |  | -------------------------- | 
| |                                         
| |                                          |  | 2004                         |  | 2003                       | 
| |                                         
| | Net income                               |  | $24,241                      |  | $11,528                    | 
| | Other comprehensive income (loss):       | 
| | Foreign currency translation adjustments | 
| |                                          |  | 1,382                        |  | 291                        | 
| |                                         
| | Comprehensive income                     |  | $25,623                      |  | $11,819                    | 
| |                                         

|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 No. 42, Costs Incurred
On Business Combinations, 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

67

---

COGNOS INCORPORATEDCONDENSED 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 six-month period ended August 31, 2004:
| | --------------------------------------------------------------------------------------------------------------------------------------

| | ($000s)                                   |  | Employee separations | Other restructuring accruals | Total accrual
| | ----------------------------------------- |  | -------------------- | ---------------------------- | -------------
| |                                          
| | Balance as at February 29, 2004           |  | $ 945                |                              | $ 3,498      
| | Cash payments during the first six months | 
| | of fiscal 2005                            |  | (563                 | )                            | (193         
| |                                          
| | Balance as at August 31, 2004             |  | $ 382                |                              | $ 3,305      
| |                                          

|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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 owns a minority interest in 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

68

---

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

|14. |  | Subsequent
Event
|--- |  | ----------------

| | Acquisition
of Frango AB
| | ------------------------

| | On
August 24, 2004, the Corporation made an offer to acquire all of the Series A shares and
Series B shares outstanding in Frango AB, a Stockholm-based company specializing in
consolidation and financial reporting solutions. The offer was adjusted on September 21,
2004 to eliminate a premium initially offered on the Series A shares. The total amount of
the offer did not change. Under the terms of the adjusted offer, Frango shareholders will
receive SEK 85.5 in cash for each Series A and Series B share outstanding. The total
value of all shares outstanding is approximately $53.1 million. The Board of Directors of
Frango unanimously recommended that the shareholders of Frango accept the offer.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
acceptance period for the Corporations offer ended on September 27, 2004. As of
September 29, 2004, the Corporation controlled approximately 97% of the capital and
approximately 98% of the votes of Frango. Payment of the offer price to shareholders who
tendered their shares pursuant to the offer commenced on October 1, 2004. The Corporation
intends to acquire all of the remaining shares of Frango through a compulsory acquisition
process.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Corporation is acquiring Frango primarily to add Frangos consolidation and financial
reporting software to its product suite and also to access Frangos distribution
channels in Europe and Asia.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Because
the acquisition was completed in such close proximity to the date of filing of this
quarterly report, the Corporation has not had an opportunity to determine the fair value
of the assets acquired and liabilities assumed. Accordingly, it is not practicable to
provide a purchase price allocation or the valuation of acquired intangible assets at
this time. The Corporation is currently in the process of completing this analysis and
expects to include the purchase price allocation in its next quarterly report on Form
10-Q for the period ended November 30, 2004. The operating results of Frango will be
included in the Corporations consolidated financial results from the date of
acquisition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

69