<PAGE>

-------------------------------------------------------------------------------

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ----------------

                                   FORM 10-Q

            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2001

                                      OR

           [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

             For The Transition Period From           To

                        Commission File Number 0-16006

                              COGNOS INCORPORATED
            (Exact Name Of Registrant As Specified In Its Charter)

                CANADA                               98-0119485
    (State Or Other Jurisdiction Of       (IRS Employer Identification No.)
    Incorporation Or Organization)

         3755 RIVERSIDE DRIVE,
       P.O. BOX 9707, STATION T,
        OTTAWA, ONTARIO, CANADA                        K1G 4K9
    (Address Of Principal Executive                  (Zip Code)
               Offices)

                                (613) 738-1440
             (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]

The number of shares outstanding of the registrant's only class of Common
Stock as of December 31, 2001, was 87,714,902.

-------------------------------------------------------------------------------
<PAGE>

                              COGNOS INCORPORATED

                                     INDEX

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----

                         PART I--FINANCIAL INFORMATION

 <C>     <S>                                                                <C>
 Item 1. Consolidated Financial Statements
         Consolidated Statements of Income for the three and nine months
          ended November 30, 2001 and November 30, 2000...................    3
         Consolidated Balance Sheets as of November 30, 2001
          and February 28, 2001...........................................    4
         Consolidated Statements of Cash Flows for the three and nine
          months
          ended November 30, 2001 and November 30, 2000...................    5
         Condensed Notes to the Consolidated Financial Statements.........    6
 Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations.......................................   11
 Item 3. Quantitative and Qualitative Disclosure about Market Risk........   22

                           PART II--OTHER INFORMATION

 Item 1. Legal Proceedings................................................   23
 Item 6. Exhibits and Reports on Form 8-K.................................   24
 Signature................................................................. 25
</TABLE>

                                       2
<PAGE>

PART I -- FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements

                              COGNOS INCORPORATED

                       CONSOLIDATED STATEMENTS OF INCOME

                   (US$000s except share amounts, U.S. GAAP)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                           Three months
                                               ended        Nine months ended
                                           November 30,       November 30,
-------------------------------------------------------------------------------
                                           2001     2000      2001      2000
-------------------------------------------------------------------------------
<S>                                       <C>      <C>      <C>       <C>
Revenue
  Product license........................ $59,114  $64,832  $152,835  $183,050
  Product support........................  44,578   37,635   129,005   106,610
  Services...............................  20,489   22,171    66,670    61,889
-------------------------------------------------------------------------------
Total revenue............................ 124,181  124,638   348,510   351,549
-------------------------------------------------------------------------------
Operating expenses
  Cost of product license................     847    1,925     2,915     5,367
  Cost of product support................   3,825    4,551    11,981    12,896
  Selling, general, and administrative...  84,943   81,339   259,127   229,895
  Research and development...............  17,579   16,854    55,424    49,215
  Acquired in-process technology.........      --    3,000        --     3,000
  Restructuring..........................      --       --    12,798        --
-------------------------------------------------------------------------------
Total operating expenses................. 107,194  107,669   342,245   300,373
-------------------------------------------------------------------------------
Operating income.........................  16,987   16,969     6,265    51,176
Interest expense.........................     (88)    (230)     (257)     (540)
Interest income..........................   1,947    3,355     7,167     9,034
-------------------------------------------------------------------------------
Income before taxes......................  18,846   20,094    13,175    59,670
Income tax provision.....................   5,560    6,467     3,887    17,548
-------------------------------------------------------------------------------
Net income............................... $13,286  $13,627  $  9,288  $ 42,122
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net income per share
  Basic.................................. $  0.15  $  0.15  $   0.11  $   0.48
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  Diluted................................ $  0.15  $  0.15  $   0.10  $   0.46
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Weighted average number of shares (000s)
  Basic..................................  87,488   88,249    87,840    87,647
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  Diluted................................  89,456   92,646    89,980    92,170
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>

                            (See accompanying notes)

                                       3
<PAGE>

                              COGNOS INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

                              (US$000s, U.S. GAAP)

<TABLE>
<CAPTION>
                                                       NOVEMBER 30, February 28,
                                                               2001         2001
--------------------------------------------------------------------------------
                                                        (UNAUDITED)
<S>                                                    <C>          <C>
ASSETS
Current assets
  Cash and cash equivalents...........................   $154,236     $115,293
  Short-term investments..............................    113,881      119,265
  Accounts receivable.................................    100,130      146,867
  Inventories.........................................        518          730
  Prepaid expenses....................................      6,566        8,648
  Income tax assets...................................      5,525           --
--------------------------------------------------------------------------------
                                                          380,856      390,803
Fixed assets..........................................     65,127       74,208
Other assets..........................................     23,322       30,581
--------------------------------------------------------------------------------
                                                         $469,305     $495,592
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LIABILITIES
Current liabilities
  Accounts payable....................................   $ 23,980     $ 28,256
  Accrued charges.....................................     31,349       21,798
  Salaries, commissions, and related items............     34,447       28,822
  Income taxes payable................................        672       17,548
  Current portion of long-term debt...................         32           32
  Deferred revenue....................................     85,003       96,674
--------------------------------------------------------------------------------
                                                          175,483      193,130
Long-term liabilities.................................        766        1,539
Deferred income taxes.................................      7,931       10,394
--------------------------------------------------------------------------------
                                                          184,180      205,063
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
  Common shares(November 30, 2001--87,277,837;
  February 28, 2001--87,885,161)......................    141,484      134,791
Retained earnings.....................................    157,089      165,755
Accumulated other comprehensive items.................    (13,448)     (10,017)
--------------------------------------------------------------------------------
                                                          285,125      290,529
--------------------------------------------------------------------------------
                                                         $469,305     $495,592
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>

                            (See accompanying notes)

                                       4
<PAGE>

                              COGNOS INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                              (US$000s, U.S. GAAP)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                           Three months
                                          ended November     Nine months ended
                                                30,            November 30,
--------------------------------------------------------------------------------
                                           2001      2000      2001      2000
--------------------------------------------------------------------------------
<S>                                      <C>       <C>       <C>       <C>
Cash provided by (used in) operating
 activities
  Net income...........................  $ 13,286  $ 13,627  $  9,288  $ 42,122
  Non-cash items
    Depreciation and amortization......     8,053     6,107    22,581    16,455
    Amortization of deferred stock-
     based compensation................       504       173     1,658       519
    Amortization of other deferred com-
     pensation.........................       606       345     1,938     1,035
    Write-off of acquired in-process
     technology........................        --     3,000        --     3,000
    Deferred income taxes..............      (309)    1,898    (2,127)    1,916
    Loss on disposal of fixed assets...        43         2       583       215
--------------------------------------------------------------------------------
                                           22,183    25,152    33,921    65,262
Change in non-cash working capital
  Decrease (increase) in accounts re-
   ceivable............................    (6,116)  (23,765)   51,080   (25,579)
  Decrease (increase) in inventory.....        48       (77)      192       (58)
  Decrease (increase) in prepaid ex-
   penses..............................       366       256     1,911    (1,667)
  Decrease (increase) in income tax as-
   sets................................     2,768        --    (5,526)       --
  Increase (decrease) in accounts pay-
   able................................    (1,631)    3,297   (10,045)    3,131
  Increase in accrued charges..........     3,911     1,660     9,989     5,993
  Increase in salaries, commissions,
   and related items...................     3,410     3,380     5,944     1,736
  Increase (decrease) in income taxes
   payable.............................      (144)      918   (16,747)    3,607
  Increase (decrease) in deferred reve-
   nue.................................    (2,123)      176   (10,693)     (559)
--------------------------------------------------------------------------------
                                           22,672    10,997    60,026    51,866
--------------------------------------------------------------------------------
Cash provided by (used in) investing
 activities
  Maturity of short-term investments...    56,557    47,249   236,788   139,069
  Purchase of short-term investments...   (83,144) (117,608) (232,035) (193,207)
  Additions to fixed assets............    (2,026)  (16,404)  (10,401)  (42,998)
  Acquisition costs....................        --   (10,406)       --   (11,260)
--------------------------------------------------------------------------------
                                          (28,613)  (97,169)   (5,648) (108,396)
--------------------------------------------------------------------------------
Cash provided by (used in) financing
 activities
  Issue of common shares...............     1,645     4,136     7,073    20,014
  Repurchase of shares.................    (9,994)       --   (19,992)   (2,053)
  Repayment of long-term debt and long-
   term liabilities....................      (806)   (2,800)     (645)   (2,414)
--------------------------------------------------------------------------------
                                           (9,155)    1,336   (13,564)   15,547
--------------------------------------------------------------------------------
Effect of exchange rate changes on
 cash..................................      (977)     (846)   (1,871)   (1,598)
--------------------------------------------------------------------------------
Net increase (decrease) in cash and
 cash equivalents......................   (16,073)  (85,682)   38,943   (42,581)
Cash and cash equivalents, beginning of
 period................................   170,309   175,536   115,293   132,435
--------------------------------------------------------------------------------
Cash and cash equivalents, end of peri-
 od....................................   154,236    89,854   154,236    89,854
Short-term investments, end of period..   113,881   116,534   113,881   116,534
--------------------------------------------------------------------------------
Cash, cash equivalents, and short-term
 investments,
 end of period.........................  $268,117  $206,388  $268,117  $206,388
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>

                            (See accompanying notes)

                                       5
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                    (All amounts in United States dollars)
                    (In accordance with United States 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 generally accepted accounting principles (GAAP) in the U.S.
  with respect to interim financial statements, applied on a consistent
  basis. Accordingly, they do not include all of the information and
  footnotes required for compliance with GAAP in the U.S. for annual
  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 Report
  for the fiscal year ended February 28, 2001.

  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.

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 recognized net of an allowance for estimated returns provided
  all the requirements of SOP 97-2 have been met.

  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.

                                       6
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                    (All amounts in United States dollars)
                    (In accordance with United States GAAP)

  Revenue from education, consulting, and other services is recognized at the
  time such services are rendered.

  For contracts with multiple obligations (e.g. deliverable and undeliverable
  products, support obligations, education, consulting and other services),
  the Corporation allocates revenue to each element of the contract based on
  objective evidence, specific to the Corporation, of the fair value of the
  element.

3. 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.

4. 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: (000's except per
  share amounts)

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED  NINE MONTHS ENDED
                                            NOVEMBER 30,        NOVEMBER 30,
                                         ------------------- ------------------
                                           2001      2000      2001     2000
                                         --------- --------- -------- ---------
<S>                                      <C>       <C>       <C>      <C>
BASIC NET INCOME PER SHARE
  Net income............................ $  13,286 $  13,627 $  9,288 $  42,122
                                         ========= ========= ======== =========
  Weighted average number of shares out-
   standing.............................    87,488    88,249   87,840    87,647
                                         ========= ========= ======== =========
  Basic net income per share............ $    0.15 $    0.15 $   0.11 $    0.48
                                         ========= ========= ======== =========
DILUTED NET INCOME PER SHARE
  Net income............................ $  13,286 $  13,627 $  9,288 $  42,122
                                         ========= ========= ======== =========
  Weighted average number of shares out-
   standing                                 87,488    88,249   87,840    87,647
  Dilutive effect of stock options......     1,968     4,397    2,140     4,523
                                         --------- --------- -------- ---------
  Adjusted weighted average number of
   shares outstanding...................    89,456    92,646   89,980    92,170
                                         ========= ========= ======== =========
  Diluted net income per share.......... $    0.15 $    0.15 $   0.10      0.46
                                         ========= ========= ======== =========
</TABLE>

                                       7
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                    (All amounts in United States dollars)
                    (In accordance with United States GAAP)
5. Comprehensive Income

  Comprehensive income includes net income and "other comprehensive income."
  Other comprehensive income refers to changes in the balances of revenues,
  expenses, gains and losses that are recorded directly as a separate
  component of Stockholders' Equity and excluded from net income.

  For the quarter ended November 30, 2001, the Corporation had other
  comprehensive expense of $1,555,000 compared to other comprehensive expense
  of $2,985,000 for the quarter ended November 30, 2000. These amounts relate
  to foreign currency translation adjustments from those subsidiaries not
  using the U.S. dollar as their functional currency, net of unrealized net
  derivative gains (losses). Total comprehensive income was $11,731,000 and
  $10,642,000 for the quarters ended November 30, 2001 and 2000,
  respectively.

  The Corporation had other comprehensive expense of $3,431,000 for the nine
  months ended November 30, 2001 and other comprehensive expense of
  $4,211,000 for the nine months ended November 30, 2000. Total comprehensive
  income was $5,857,000 for the nine months ended November 30, 2001 and total
  comprehensive income was $37,911,000 for the nine months ended November 30,
  2000.

6. Segmented Information

  The Corporation has one reportable segment--computer software products.

7. Business Restructuring Charges

  In connection with a restructuring plan to align the Corporation's cost
  structure and operations to the prevailing economic environment, the
  Corporation recorded in the quarter ended May 31, 2001 a pre-tax business
  restructuring charge to earnings of $12,798,000. Business restructuring
  charges primarily relate to involuntary employee separations for
  approximately 300 employees, as well as asset write-downs, and accruals for
  net costs of abandoning leases and related write-downs of leasehold
  improvements. The remaining accrual is included on the balance sheet as
  accrued charges and salaries, commissions and related items.

  The employee separations impact all functional groups and geographic
  regions of the Corporation. As of November 30, 2001, all employee
  separations under the restructuring plan had been completed and related
  cash payments will be substantially completed throughout the remainder of
  fiscal 2002.

                                       8
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                    (All amounts in United States dollars)
                    (In accordance with United States GAAP)

  The following table displays the status of the restructuring reserve at
  November 30, 2001: (000's)

<TABLE>
<CAPTION>
                                             OTHER
                              EMPLOYEE   RESTRUCTURING
                             SEPARATIONS     COSTS      TOTAL
                             ----------- ------------- -------
   <S>                       <C>         <C>           <C>
   RESTRUCTURING CHARGES IN
    Q1 FISCAL 2002.........    $9,660       $3,138     $12,798
   Cash Payments...........      (758)                    (758)
   Asset write-downs.......                 (1,557)     (1,557)
                               ------       ------     -------
   BALANCE AS AT MAY 31,
    2001...................     8,902        1,581      10,483
   Cash Payments...........    (4,443)        (970)     (5,413)
   Asset write-downs.......        --           --          --
                               ------       ------     -------
   BALANCE AS AT AUGUST 31,
    2001...................     4,459          611       5,070
   Cash Payments...........      (884)        (197)     (1,081)
   Asset write-downs.......        --           --          --
                               ------       ------     -------
   BALANCE AS AT NOVEMBER
    30, 2001...............    $3,575       $  414     $ 3,989
</TABLE>

8. Litigation

  On May 5, 2000 an action was filed in the United States District Court for
  the Northern District of California against the Corporation and its
  subsidiary, Cognos Corporation (collectively "Cognos") by Business Objects
  S.A. ("Complainant"), for alleged patent infringement. The complaint
  alleges that the Corporation's Impromptu product infringes the
  Complainant's United States Patent No. 5,555,403 entitled "Relational
  Database Access System using Semantically Dynamic Objects". The complaint
  seeks relief in the form of an injunction against the Corporation and
  unspecified damages. On May 30, 2000 the Corporation answered the
  complaint, denying all material allegations, and counterclaimed against the
  Complainant for a declaratory judgment that the Corporation is not
  infringing the Complainant's patent and that the patent is invalid. A trial
  date has been set for May 2002. The Corporation cannot estimate the
  financial impact, if any, at this time.

  In addition, the Corporation and its subsidiaries may, from time to time,
  be involved in other legal proceedings, claims, and litigation that arise
  in the ordinary course of business which the

                                       9
<PAGE>

                              COGNOS INCORPORATED

           CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                    (All amounts in United States dollars)
                    (In accordance with United States GAAP)
  Corporation believes would not reasonably be expected to have a material
  adverse effect on the financial condition of the Corporation.

9. Recent Pronouncements

  In June 2001, the Financial Accounting Standards Board issued Statements of
  Financial Accounting Standards No. 141, Business Combinations, and No. 142,
  Goodwill and Other Intangible Assets ("the pronouncements"), effective for
  fiscal years beginning after December 15, 2001. Under the new rules,
  goodwill (and intangible assets deemed to have indefinite lives) will no
  longer be amortized but will be subject to annual impairment tests in
  accordance with the pronouncements. Other intangible assets will continue
  to be amortized over their useful lives.

  The Corporation will apply the new rules on accounting for goodwill and
  other intangible assets beginning in the first quarter of fiscal 2003.
  Application of the non-amortization provisions of the pronouncements is
  expected to result in an increase in net income of $4,000,000 ($0.04 per
  share) for fiscal 2003. During fiscal 2003, the Corporation will perform
  the required impairment tests of goodwill and indefinite lived intangible
  assets as of March 1, 2002 and has not yet determined what the effect of
  these tests will be on the earnings and financial position of the
  Corporation.

  In October 2001, the Financial Accounting Standards Board (the "FASB")
  issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-
  Lived Assets" ("SFAS 144"), which addresses financial accounting and
  reporting for the impairment or disposal of long-lived assets. This
  Statement supersedes SFAS 121, and the accounting and reporting provisions
  of APB 30, for the disposal of a segment of a business. The provisions of
  SFAS 144 are required to be adopted by March 1, 2002. The Corporation
  believes that the adoption of SFAS 144 will not have a material effect on
  the business, results of operations, and financial condition.

                                      10
<PAGE>

Item 2.
                              COGNOS INCORPORATED

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         (in United States dollars, and in accordance with U.S. GAAP)

The following information should be read in conjunction with the unaudited
Consolidated Financial Statements and Notes included in Item 1 of this
Quarterly Report and can also be read in conjunction with the audited
Consolidated Financial Statements and Notes, and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in our
Annual Report for the fiscal year ended February 28, 2001 (fiscal 2001).

RESULTS OF OPERATIONS

Revenue for the quarter ended November 30, 2001 was $124.2 million, a 0.4%
decrease from revenue of $124.6 million for the same quarter last year. Pretax
income for the quarter ended November 30, 2001 was $18.8 million compared to
pretax income of $20.1 million in the same quarter last year. Net income for
the current quarter was $13.3 million compared to net income of $13.6 million
for the same quarter last year. Basic net income per share was $0.15 for both
the quarter ended November 30, 2001 and the same quarter in the previous year.
Diluted net income per share was $0.15 for both the quarters ending November
30, 2001 and November 30, 2000. The results for the quarter ended November 30,
2000 include the write-off of $3.0 million related to the in-process
technology acquired on the purchase of NoticeCast Software Ltd. Excluding the
effect of this item, net income and diluted net income per share for the
quarter would have been $16.6 million and $0.18, respectively, compared to
$13.3 million and $0.15, respectively, for the current year.

Revenue for the nine months ended November 30, 2001 was $348.5 million, a 1%
decrease from revenue of $351.5 million for the same period last year. Pretax
income for the nine months ended November 30, 2001 was $13.2 million compared
to pretax income of $59.7 million in the same period last year. Net income for
the current nine months was $9.3 million compared to net income of $42.1
million for the same period last year. Diluted net income per share was $0.10
for the current nine months, compared to diluted net income per share of $0.46
for the same period last year. Basic net income per share was $0.11 for the
nine month period ending November 30, 2001 compared to basic net income per
share of $0.48 for the nine month period ending November 30, 2000.

The results for the nine months ended November 30, 2001 include a business
restructuring charge of $12.8 million in connection with a restructuring plan
to align our cost structure and operations to the current economic environment
as reported in the first quarter of fiscal 2002. Excluding the effect of this
item, net income and diluted net income per share for the nine months would
have been $18.3 million and $0.20, respectively, compared to net income of
$42.1 million and $0.46, respectively, for the same period last year. The
results for the quarter ended November 30, 2000 include the write-off of $3.0
million related to the in-process technology acquired on the purchase of
NoticeCast Software Ltd. Excluding the effect of this item, net

                                      11
<PAGE>

income and diluted net income per share for the nine months ended November 30,
2000 would have been $45.1 million and $0.49, respectively, compared to net
income and diluted net income per share excluding restructuring charges of
$18.3 million and $0.20, respectively, for the same period in the current
year. The decline in operating performance over the nine month period is due
to the decline in information technology spending and the continuing uncertain
economic environment in our principal markets and specifically in the U.S.,
which is our largest market. This has impacted all sales but was most
pronounced in deals greater than $200,000.

Total operating expenses for the quarter ended November 30, 2001 were $107.2
million, an 0.4% decrease from operating expenses of $107.7 million for the
same quarter last year. Operating margins were 14% for both the quarters ended
November 30, 2001 and 2000, respectively.

Total operating expenses for the nine months ended November 30, 2001 were
$342.2 million, a 14% increase from operating expenses of $300.4 million for
the same period last year. Operating margins for the nine months ended
November 30, 2001 were 2%, compared to 15% for the same period last year.
Excluding the effect related to the business restructuring charge discussed
above, operating expenses in the nine month period ended November 30, 2001
would have been $329.4 million, an increase of 10% from the same period last
year. Operating margins for the nine month period would have been 5%, compared
to 15% for the same period last year. We implemented a restructuring plan to
align our cost structure and operations to the current economic environment
resulting in a pre-tax business restructuring charge to earnings of $12.8
million reported in the first quarter of fiscal 2002. Business restructuring
charges primarily relate to involuntary employee separations for approximately
300 employees, as well as asset write-downs, and accruals for net costs of
abandoning leases and related write-down of leasehold improvements. The
employee separations impact all functional groups and geographic regions.

The following table sets out, for the periods indicated, the percentage that
each income and expense item bears to revenue, and the percentage change of
each item as compared to the indicated prior period.

                                      12
<PAGE>

<TABLE>
<CAPTION>
                               PERCENTAGE OF REVENUE              PERCENTAGE CHANGE
                          ----------------------------------  ---------------------------
                                                NINE MONTHS
                                                   ENDED
                          THREE MONTHS ENDED     NOVEMBER
                             NOVEMBER 30,           30,       THREE MONTHS NINE MONTHS
                          --------------------  ------------   ENDED NOVEMBER 30, 2000
                            2001       2000     2001   2000            TO 2001
                          ---------  ---------  -----  -----  ---------------------------
<S>                       <C>        <C>        <C>    <C>    <C>            <C>
Revenue.................      100.0%     100.0% 100.0% 100.0%         (0.4)%         (0.9)%
                          ---------  ---------  -----  -----
Operating expenses
  Cost of product li-
   cense................        0.7        1.5    0.8    1.5         (56.0)         (45.7)
  Cost of product sup-
   port.................        3.1        3.7    3.4    3.7         (16.0)          (7.1)
  Selling, general, and
   administrative.......       68.4       65.3   74.4   65.4           4.4           12.7
  Research and develop-
   ment.................       14.1       13.5   15.9   14.0           4.3           12.6
  Acquired in-process
   technology...........        0.0        2.4    0.0    0.8          N.M.           N.M.
  Restructuring.........        0.0        0.0    3.7    0.0          N.M.           N.M.
                          ---------  ---------  -----  -----
Total operating ex-
 penses.................       86.3       86.4   98.2   85.4          (0.4)          13.9
                          ---------  ---------  -----  -----
Operating income (loss).       13.7       13.6    1.8   14.6           0.1          (87.8)
Interest expense........       (0.1)      (0.2)  (0.1)  (0.2)        (61.7)         (52.4)
Interest income.........        1.6        2.7    2.1    2.6         (42.0)         (20.7)
                          ---------  ---------  -----  -----
Income (loss) before
 taxes..................       15.2       16.1    3.8   17.0          (6.2)         (77.9)
Income tax provision
 (benefit)..............        4.5        5.2    1.1    5.0         (14.0)         (77.8)
                          ---------  ---------  -----  -----
Net income (loss).......       10.7%      10.9%   2.7%  12.0%         (2.5)%        (78.0)%
                          =========  =========  =====  =====
</TABLE>

N.M.--NOT MEANINGFUL

REVENUE

Our total revenue was $124.2 million for the quarter ended November 30, 2001,
a decrease of $0.5 million or 0.4%, compared to the quarter ended November 30,
2000. Our total revenue was $348.5 million for the nine months ended November
30, 2001, a decrease of $3.0 million or 1%, compared to the nine months ended
November 30, 2000. We operate internationally with our revenue by major
geography represented by approximately: 62% from North America, 31% from
Europe and 7% from Asia-Pacific. This was relatively consistent within the
three and nine month periods ended November 30, 2001. As a result of our
international operations, a substantial portion of our business is conducted
in foreign currencies. Accordingly, our results are affected by year-over-year
exchange rate fluctuations of the United States dollar relative to various
European currencies, to the Canadian dollar, and to a lesser extent, other
foreign currencies. Foreign exchange rate fluctuations reduced overall revenue
by an immaterial amount for the quarter and two percentage points in the nine
months ended November 30, 2001.

Our total revenue was derived primarily from the revenue attributable to the
licensing, supporting and servicing of our business intelligence products
solution, including PowerPlay(R), Impromptu(R), Cognos Query, Cognos
Visualizer, DecisionStream(TM), Scenario(TM), KPI, Cognos Finance, and Cognos
e-Applications. Total revenue (license, support, and services revenue) derived
from these products was $114.1 million in the quarter ended November 30, 2001,
an

                                      13
<PAGE>

increase of $1.4 million or 1% compared to the quarter ended November 30,
2000. For the nine months ended November 30, 2001 business intelligence
revenue was $319.6 million, an increase of $4.8 million or 2% when compared to
the corresponding period in the prior fiscal year. Revenue related to these
business intelligence products was 92% of total revenue for the quarter and
nine months ended November 30, 2001 and 90% for the quarter and nine months
ended November 30, 2000.

We believe that our business intelligence products address the current market
need for distributing corporate information to the end user's desktop in an
extended enterprise environment of corporate intranets, extranets, and
client/server networks.

Total revenue (license, support, and services revenue) from our application
development tools, PowerHouse(R) and Axiant(R), was $10.0 million for the
quarter ended November 30, 2001, a decrease of $1.8 million or 15% from the
corresponding period in the prior fiscal year, and was $29.0 million for the
nine months ended November 30, 2001, a decrease of $7.8 million or 21% when
compared to the corresponding nine month period in fiscal 2001. We believe
that revenues from these products will continue to decline.

The change in total revenue from the three revenue categories in the quarter
ended November 30, 2001 from November 30, 2000 was as follows: a 9% decrease
in product license revenue, a 18% increase in product support revenue, and a
8% decrease in services revenue. The change for the same categories for the
nine months was as follows: (17%), 21% and 8%, respectively.

Product License Revenue

Product license revenue was $59.1 million in the quarter ended November 30,
2001, a decrease of $5.7 million or 9%, and was $152.8 million for the nine
months ended November 30, 2001, a decrease of $30.2 million or 17% compared to
the corresponding periods in the prior fiscal year. The decrease in product
license revenue for this period was predominantly due to the decline in
information technology spending and the continuing uncertain economic
environment in our principal markets and specifically in the U.S., which is
our largest market. This affected the sales of our business intelligence
products. Product license revenue accounted for 48% of total revenue in the
quarter ended November 30, 2001, compared to 52% for the corresponding quarter
in the prior fiscal year, and accounted for 44% of total revenue for the nine
months ended November 30, 2001, compared to 52% for the corresponding period
in the prior fiscal year.

Product license revenue from the business intelligence products was $56.5
million for the quarter ended November 30, 2001, a decrease of $5.2 million or
8%, and was $146.2 million for the nine months ended November 30, 2001, a
decrease of $26.7 million or 15% compared to the corresponding periods in the
prior fiscal year. Product license revenue from these business intelligence
products accounted for 96% and 95% of total product license revenue for the
quarters ended November 30, 2001 and 2000, respectively. On a year-to-date
basis, we derived 96% of product license revenue from these products, compared
to 94% in the corresponding period last year.

Product license revenue from the application development tools was $2.6
million for the quarter ended November 30, 2001, a decrease of $0.5 million or
16%, and was $6.7 million for the nine months ended November 30, 2001, a
decrease of $3.6 million or 35% compared to the corresponding periods in the
prior fiscal year. The decline in product license revenue in this

                                      14
<PAGE>

market is consistent with the market trend away from proprietary systems and
host-based computing toward industry-standard systems, corporate intranets,
extranets, client/server technology and packaged applications products. We
expect that the trend of decreasing product license revenue from these
products will continue.

Product Support Revenue

Product support revenue was $44.6 million in the quarter ended November 30,
2001, an increase of $6.9 million or 18%, and was $129.0 million for the nine
months ended November 30, 2001, an increase of $22.4 million or 21% compared
to the corresponding periods in the prior fiscal year. The increase in product
support revenue was the result of the expansion of our customer base, as well
as the positive rate of renewal of support contracts.

Product support revenue accounted for 36% and 30% of our total revenue for
each of the quarters ended November 30, 2001, and 2000, respectively and
accounted for 37% of total revenue for the nine months ended November 30, 2001
and 30% for the corresponding period in the prior fiscal year.

Total product support revenue from the business intelligence products
comprised 84% and 78% of the total product support revenue for the quarters
ended November 30, 2001, and November 30, 2000, respectively and comprised 83%
and 76% of the total product support revenue for the nine months ended
November 30, 2001 and November 30, 2000, respectively. Total support revenue
from the business intelligence products increased by 28% in the quarter ended
November 30, 2001, and total support revenue from the application development
tools decreased by 16%, compared to the corresponding quarter in the prior
fiscal year. For the nine months ended November 30, 2001, total support
revenue from the business intelligence products increased by 32%, whereas
total support revenue from the application development tools decreased by 15%,
compared to the corresponding period in the prior fiscal year.

Services Revenue

Services revenue (training, consulting, and other revenue) was $20.5 million
in the quarter ended November 30, 2001, a decrease of $1.7 million or 8%, and
was $66.7 million, an increase of $4.8 million or 8% for the nine months ended
November 30, 2001 compared to the corresponding periods in the prior fiscal
year. Services revenue accounted for 16% and 19% of our total revenue for the
quarter and nine months ended November 30, 2001, compared to 18% for both the
quarter and nine months ended, in the prior fiscal year. The decrease in the
dollar amounts related to the quarter was mainly the result of the events of
September 11th. The disruption in the United States in the wake of these
events including air travel and business closures affected our ability to
offer services and our customers appetite to consume them. The increase in the
dollar amounts in the nine month period was primarily attributable to an
increase in consulting revenue, offset slightly by small decreases in
education and documentation associated with our business intelligence
products, consistent with the trend in product license revenue for these
products.

In the quarter ended November 30, 2001, services revenue associated with the
business intelligence products contributed $20.1 million, a decrease of $1.7
million or 8%, and contributed $65.9 million, an increase of $5.2 million or
9% for the nine months ended November 30, 2001 compared to the corresponding
periods in the prior fiscal year. Services revenue associated with application
development tools declined $0.1 million or 7% and $0.4

                                      15
<PAGE>

million or 36%, respectively for the same periods. Services revenue associated
with the business intelligence products contributed 98% of the total services
revenue for the quarter ended November 30, 2001 and 99% for the nine months
ended November 30, 2001 compared to 98% for both the corresponding periods in
the prior fiscal year.

COST OF PRODUCT LICENSE

The cost of product license consists primarily of royalties for technology
licensed from third parties, as well as the costs of materials and
distribution related to licensed software.

The cost of product license revenue was $0.8 million, a decrease of $1.1
million or 56% in the quarter ended November 30, 2001, compared to the
corresponding period in the prior fiscal year and was $2.9 million for the
nine months ended November 30, 2001, a $2.5 million or 46% decrease from the
corresponding period in the prior fiscal year. These costs represented 1% and
2% of product license revenue for the three and nine months ended November 30,
2001, respectively, as compared to 3% for the three and nine months ended
November 30, 2000. The improved margins in both the quarter and the nine
months ended November 30, 2001 were the result of decreases in royalties to
third parties and in costs of materials and distribution.

COST OF PRODUCT SUPPORT

The cost of product support includes the costs associated with resolving
customer inquiries and other telesupport activities, royalties in respect of
technological support received from third parties, and the cost of materials
delivered in connection with enhancement releases.

The cost of product support revenue was $3.8 million, a decrease of $0.7
million or 16% in the quarter ended November 30, 2001, and was $12.0 million,
a decrease of $0.9 million or 7% for the nine months ended November 30, 2001,
compared to the corresponding periods in the prior fiscal year. The decline in
cost of product support was due to declines in royalties to third parties,
costs of materials and distribution, and telesupport.

The cost of product support represented 9% of total product support revenue
for the three and nine months ended November 30, 2001, respectively, compared
to 12% for both the corresponding periods in the prior fiscal year,
respectively.

SELLING, GENERAL, AND ADMINISTRATIVE

Selling, general, and administrative (SG&A) expenses were $84.9 million, an
increase of $3.6 million or 4% in the quarter ended November 30, 2001, and
were $259.1 million, an increase of $29.2 million or 13% for the nine months
ended November 30, 2001, compared to the corresponding periods in the prior
fiscal year. These costs increased as a percentage of revenue, representing
68% and 74% for the three and nine months ended November 30, 2001,
respectively compared to 65% for the corresponding periods in the prior fiscal
year. The increase in these expenses was predominantly due to increased
compensation expense.

                                      16
<PAGE>

RESEARCH AND DEVELOPMENT

Research and development (R&D) costs were $17.6 million, an increase of $0.7
million or 4% in the quarter ended November 30, 2001, and were $55.4 million,
an increase of $6.2 million or 13% for the nine months ended November 30,
2001, compared to the corresponding periods in the prior fiscal year. The
increase was predominantly the result of increases associated with higher
staffing levels and related compensation expenses, as well as increases in
services purchased externally. The increase in the average number of employees
within R&D was 4% and 12% for the three and nine months ended November 30,
2001, respectively, when compared to the corresponding periods in the prior
fiscal year.

During the quarter ended November 30, 2001 we continued to invest in R&D
activities for our business intelligence solutions. Highlights of the
quarter's research and development and other product related activities
include: achieving the latest version of certification for the SAP Business
Information Warehouse (SAP BW); passing full SAP BW variables support
validation and new performance tests; achieving successful validation of the
Cognos Business Intelligence Platform version 6.0 integration with Siebel Data
Warehouse, version 6.0. We continued Beta testing on Cognos Series 7 and had
several customers announce their support for the product as we move closer to
full release, scheduled for Q4 of this fiscal year. We continued development
of our e-Application packages including Oracle and SAP platforms. We also
continued investment in the remainder of the existing Cognos enterprise
business intelligence platform with several translation releases and a release
of DecisionStream 6.5.

Software development costs are expensed as incurred unless they meet generally
accepted accounting criteria for deferral and amortization. Software
development costs incurred prior to the establishment of technological
feasibility do not meet these criteria, and are expensed as incurred.
Capitalized costs are amortized over a period not exceeding 36 months. No
costs were deferred in either quarter. Costs were not deferred in the period
because either no projects met the criteria for deferral or the period between
achieving technological feasibility and the general availability of the
product was short, and the associated costs were immaterial.

BUSINESS RESTRUCTURING CHARGE

During the quarter ended May 31, 2001, we implemented a restructuring plan to
align our cost structure and operations to the prevailing economic
environment, resulting in a pre-tax business restructuring charge to earnings
of $12.8 million. Business restructuring charges primarily relate to
involuntary employee separations for approximately 300 employees, as well as
asset write-downs, and accruals for net costs of abandoning leases and related
write-down of leasehold improvements. The employee separations impact all
functional groups and geographic regions.

Cost savings as a result of the restructuring plan will reduce compensation,
amortization, and lease expenses. The decrease in costs outlined above will
primarily impact selling, general and administration expense and research and
development expense. The expense reductions took effect in the second quarter
of this fiscal year.

Cash outlays of $7.3 million related to the restructuring activities were paid
in the first three quarters of fiscal 2002 and the balance is expected to be
substantially paid in the next quarter.

                                      17
<PAGE>

INTEREST INCOME AND EXPENSE

Net interest income was $1.9 million in the quarter ended November 30, 2001, a
decrease of $1.3 million or 41%, and was $6.9 million, a decrease of $1.6
million or 19% for the nine months ended November 30, 2001, compared to the
corresponding periods in the prior fiscal year. The decrease was due to lower
effective interest rates in both fiscal periods as compared to the
corresponding periods in the prior fiscal year.

INCOME TAX PROVISION

Our tax rate is affected by the relative profitability of our operations in
various geographic regions. In the three months ended November 30, 2001, we
recorded an income tax provision of $5.6 million. For the nine month period
ended November 30, 2001 we recorded an income tax provision of $3.9 million.
These represent an effective income tax rate of 29.5%. In the quarter and nine
months ended November 30, 2000, we recorded an income tax provision of $6.5
million and $17.5 million respectively, representing an effective income tax
rate of 32% for the quarter and 29% for the nine month period.

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2001, we had $268.1 million in cash, cash equivalents, and
short-term investments, an increase of $33.6 million from February 28, 2001.
In addition, we have an unsecured credit facility that includes an operating
line and foreign exchange conversion facilities. The operating line permits us
to borrow funds or issue letters of credit or guarantee up to Cdn$15.0
(US$9.5) million, subject to certain covenants. As of November 30, 2001, there
were no direct borrowings under this operating line. As discussed further
below, we have foreign exchange conversion facilities that allow us to hold
foreign exchange contracts of approximately Cdn$130.0 (US$82.7) million
outstanding at any one time.

As of November 30, 2001, we had a total of $0.8 million of long-term
liabilities (including the current portion of long-term debt), consisting of
other long-term liabilities and certain capital leases. As of November 30,
2001, working capital was $205.4 million, an increase of $7.7 million from
February 28, 2001, primarily because of increases in cash and cash equivalents
and decreases in income taxes payable and deferred product support revenue
offset partially by decreases in accounts receivable. The change in working
capital for the nine months ended November 30, 2001 included the use of $20.0
million in cash for the repurchase of 1,251,600 of our common shares of stock
during the period.

Cash provided by operating activities (after changes in non-cash working
capital items) for the nine months ended November 30, 2001 was $60.0 million,
a $8.2 million increase when compared to the corresponding period in the prior
fiscal year. This increase as compared to the prior period was primarily due
to the decrease in the non-cash working capital requirements offset by the
decrease in net income during the current nine month period.

Cash used in investing activities was $5.6 million for the nine months ended
November 30, 2001 compared to $108.4 million used in investing activities for
the corresponding period in the prior fiscal year. During the current nine
month period, we received $4.8 million related to the activity in short-term
investments (net of maturities) compared to an investment of $54.1 million in
the

                                      18
<PAGE>

corresponding period in the prior fiscal year. In the nine months ended
November 30, 2000 there were acquisition costs totaling $11.3 million relating
to the Corporation's purchase of its distributor in Finland, the purchase of
NoticeCast Software Ltd. and the acquisition of Johnson & Michaels, Inc.
Additions to fixed assets during the nine month period ended November 30, 2001
were $10.4 million as compared to $43.0 million in the corresponding period in
the prior fiscal year. The decrease in additions to fixed assets mostly
relates to the construction of a second building on the site of our
headquarters in Ottawa in the prior fiscal year. The construction was
substantially completed in fourth quarter of fiscal 2001; therefore, for the
quarter ended November 30, 2001 no construction costs were incurred.

Cash used in financing activities was $13.6 million for the nine months ended
November 30, 2001 compared to cash provided by financing activities of $15.5
million in the corresponding period in the prior fiscal year. We issued
622,000 common shares, valued at $7.1 million, during the nine months ended
November 30, 2001 compared to the issuance of 1,625,000 shares valued at $17.6
million for the same period in the prior fiscal year. The issuance of shares
in both periods was pursuant to the Corporation's stock purchase plan and the
exercise of stock options by employees, officers, and directors. The
Corporation's financing activities for both nine month periods also included
the repurchase of its own common shares in the open market. During the nine
months ended November 30, 2001, the Corporation repurchased 1,251,600 of its
own shares at a cost of $20.0 million compared to 50,000 shares repurchased at
a cost of $2.0 million in the corresponding period in the prior fiscal year.

The share repurchases made in the current nine month period were part of two
open market share repurchase programs. In October 2000, a program was adopted
that enabled the Corporation to purchase up to 4,403,510 common shares (not
more than 5% of those issued and outstanding) between October 9, 2000 and
October 8, 2001. Under this program the Corporation repurchased 815,000 of its
shares for $12.9 million in the nine months ended November 30, 2001. During
the term of the program the Corporation repurchased a total of 1,344,500 of
its shares for $24.9 million; all repurchased shares were cancelled. Purchases
were made on the Nasdaq Stock Market at prevailing open market prices and paid
out of general corporate funds.

On October 4, 2001, a new open market share repurchase program was announced.
This program enables the Corporation to purchase up to 4,400,943 common shares
(not more than 5% of those issued and outstanding) between October 9, 2001 and
October 8, 2002 on the Nasdaq Stock Market or the Toronto Stock Exchange.
Under this program the Corporation repurchased 436,600 of its shares for $7.1
million in the nine months ended November 30, 2001; all repurchased shares
were cancelled. Purchases were made on the Nasdaq Stock Market at prevailing
open market prices and paid out of general corporate funds. This program does
not commit us to make any further share repurchases. Any additional
repurchased shares will be cancelled.

Our policy with respect to foreign currency exposure is to manage our
financial exposure to certain foreign exchange fluctuations with the objective
of neutralizing some of the impact of foreign currency exchange movements. To
achieve this objective, we enter into foreign exchange forward contracts to
hedge portions of the net investment in our various subsidiaries. We enter
into these foreign exchange forward contracts with major Canadian chartered
banks, and therefore do not anticipate non-performance by these
counterparties. We limit these foreign exchange forward contracts to a maximum
term of six months. The amount of the exposure on account of any non-
performance is restricted to the unrealized gains in such contracts. As of

                                      19
<PAGE>

November 30, 2001, we had foreign exchange forward contracts, with maturity
dates ranging from December 20, 2001 to April 25, 2002, to exchange various
foreign currencies in the amount of $18.8 million.

We believe that our current cash, cash equivalents and short term investments
balance and funds generated from operations, if any, will be adequate to
finance operations and meet any capital requirements over the next twelve
months.

EUROPEAN ECONOMIC AND MONETARY UNION

The euro currency was introduced on January 1, 1999, and was fully implemented
on January 1, 2002. The transition to this new currency has associated with it
many potential implications for businesses operating in Europe including, but
not limited to, products, information technology, pricing, currency exchange
rate risk and derivatives exposure, continuity of material contracts, and
potential tax consequences.

The new euro currency was introduced in stages over the course of a 3.5 year
transition period. We believe the transition to the euro will have limited
longer-term implications on our business. We have taken steps in the
transition to the euro in the area of our internal processes and systems
through identifying, modifying, and testing these processes and systems to
handle transactions and reporting requirements involving the euro in
accordance with the regulations. Our financial application systems represent
the most significant internal systems that are affected by the transition to
the euro. We earlier upgraded these systems to a version that enables us,
together with certain process changes and modifications provided by the
application vendor to their supported customers, to handle the initial
requirements for transactions involving the euro. In the first quarter of
fiscal 2002 we reassessed the need to further upgrade our financial
applications system to handle the full requirements of the euro. We have
experienced no significant impact and believe our current procedures and the
modifications which have been made to the financial application system are
adequate to handle the adoption of the euro, however, we continue to identify
and, where necessary, modify our systems and processes in order to handle the
various stages of the euro implementation. We are continuing to monitor our
pricing in Europe, giving consideration to the transition to the euro.

We believe that the costs relating to the conversion of our internal systems
and processes incurred to date, along with any future costs relating to such
conversions, will not have a material adverse effect on our business, results
of operations, or financial condition.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

This Form 10-Q contains forward-looking statements relating to, among other
things, our expectations concerning future revenues and earnings; the effect
of the restructuring plan implemented in the first quarter of fiscal 2002 on
results and strategic programs, including the effect of the reduced expenses
on results; the success and soundness of our business model and its sales,
marketing and technology strategies; the effect of the continuing uncertain
economic environment on those strategies; the sufficiency of capital to meet
our working capital and capital expenditure requirements; our ability to
deliver business intelligence solutions that

                                      20
<PAGE>

respond to changing market requirements; the updating, development,
introduction and shipment of our current and future products; and our ability
to compete in an intensely competitive marketplace.

These forward-looking statements are neither promises nor guarantees, but
involve risks and uncertainties that may cause actual results to differ
materially from those in the forward-looking statements. Factors that may
cause such differences include, but are not limited to: our ability to develop
and introduce new products and enhancements in the business intelligence
software market; unanticipated delays in the release and shipment of new
products; the impact of global economic conditions on our business and our
ability to implement timely and appropriate remedial measures; our ability to
select and implement appropriate business models and strategies; our ability
to achieve and maintain revenue growth or to anticipate a decline in revenue
from any of our products or services; fluctuations in our quarterly and annual
operating results based on historical patterns, which may cause our stock
price to fluctuate or decline; rapid technological change and new product
introductions and enhancements in the business intelligence software market;
new product introductions and enhancements by competitors and our ability to
compete in an intensely competitive marketplace; our reliance on partners and
other third party distribution channels to market and distribute our products;
unauthorized use of our intellectual property; claims by third parties that
our software infringes their intellectual property; the risks inherent in
international operations, such as currency exchange rate fluctuations; our
ability to identify, hire, train, motivate and retain highly qualified
management and other key personnel; and our ability to identify, pursue and
complete acquisitions which could divert management attention and financial
resources and not produce desired business results. Readers should not place
undue reliance on any such forward-looking statements, which speak only as of
the date they are made. We disclaim any obligation to publicly update or
revise any such statement to reflect any change in our expectations or in
events, conditions, or circumstances on which any such statements may be
based, or that may affect the likelihood that actual results will differ from
those contained in the forward-looking statements. A detailed discussion of
each of these risk factors is contained under the heading "Certain Factors
That May Affect Future Results" in our most recent Annual Report on Form 10-K
filed with the United States Securities and Exchange Commission.

                                      21
<PAGE>

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Market risk represents the risk of loss that may impact our financial position
due to adverse changes in financial market prices and rates. Our market risk
exposure is primarily a result of fluctuations in interest rates and foreign
currency exchange rates. We do not hold or issue financial instruments for
trading purposes.

INTEREST RATE RISK

Our exposure to market rate risk for changes in interest rates relates
primarily to our investment portfolio. The investment of cash is regulated by
our investment policy of which the primary objective is security of principal.
Interest income on our cash, cash equivalents, and short-term investments is
subject to interest rate fluctuations, but we believe that the impact of these
fluctuations does not have a material effect on our financial position due to
the short-term nature of these financial instruments. For the quarter and nine
months ended November 30, 2001, a 100 basis-point adverse change in interest
rates would not have had a material effect on our consolidated financial
position, earnings, or cash flows.

FOREIGN CURRENCY RISK

We operate internationally; accordingly, a substantial portion of our
financial instruments is held in currencies other than the United States
dollar. Our policy with respect to foreign currency exposure is to manage
financial exposure to certain foreign exchange fluctuations with the objective
of neutralizing some of the impact of foreign currency exchange movements. To
achieve this objective, we enter into foreign exchange forward contracts to
hedge portions of the net investment in various subsidiaries. The forward
contracts are typically between the United States dollar and the British
pound, the German mark, and the Australian dollar. Sensitivity analysis is
used to measure our foreign currency exchange rate risk. As of November 30,
2001, a 10% adverse change in foreign exchange rates versus the U.S. dollar
would not have had a material effect on our reported cash, cash equivalents,
and short-term investments.

                                      22
<PAGE>

PART II--OTHER INFORMATION

Item 1. Legal Proceedings

On May 5, 2000 an action was filed in the United States District Court for the
Northern District of California against us and our subsidiary, Cognos
Corporation (collectively "Cognos") by Business Objects S.A. ("Complainant"),
for alleged patent infringement. The complaint alleges that our Impromptu
product infringes the Complainant's United States Patent No. 5,555,403
entitled "Relational Database Access System using Semantically Dynamic
Objects". The complaint seeks relief in the form of an injunction against us
and unspecified damages. On May 30, 2000 we answered the complaint, denying
all material allegations, and counterclaimed against Business Objects for a
declaratory judgment that we are not infringing Business Objects' patent and
that the patent is invalid. A trial date has been set for May 2002. We believe
the complaint is without merit. We cannot estimate the financial impact, if
any, at this time. If successful, a claim of infringement against us and our
inability to license the infringed or similar technology on commercially
reasonable terms could have a material adverse effect on our business,
operating results, and financial condition.

In addition, the Corporation and its subsidiaries may, from time to time, be
involved in other legal proceedings, claims, and litigation that arise in the
ordinary course of business which the Corporation believes would not
reasonably be expected to have a material adverse effect on the financial
condition of the Corporation.

                                      23
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

a)Exhibits

  99--Selected Consolidated Financial Statements and Notes in U.S. Dollars
      and in accordance with Canadian Generally Accepted Accounting
      Principles

  99.1--Management's Discussion and Analysis of Financial Condition and
      Results of Operations-Canadian Supplement

b)Reports on Form 8-K

There were no reports on Form 8-K filed during the three months ended November
30, 2001.

                                      24
<PAGE>

                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          COGNOS INCORPORATED
                                          (Registrant)

          January 11, 2002                          /s/ Tom Manley
-------------------------------------     -------------------------------------
                Date                      Tom Manley

                                          Senior Vice-President and Chief
                                          Financial Officer
                                          (Principal Financial Officer and
                                          Chief Accounting Officer)

                                      25
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT NO.                        DESCRIPTION                         PAGE
 -----------                        -----------                         -----
 <C>         <S>                                                        <C>
  99         Selected Consolidated Financial Statements and Notes in
             U.S. Dollars
             and in accordance with Canadian Generally Accepted Ac-
             counting Principles                                        27-34
 99.1        Management's Discussion and Analysis of Financial Condi-
             tion and
             Results of Operations-Canadian Supplement                  35-36
</TABLE>

                                       26