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Exhibit 99.1

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

The following Managements
Discussion and Analysis of Financial Condition and Results of Operations-Canadian
Supplement (Canadian Supplement) should be read in conjunction with our
Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) included in Item 2 of this quarterly report. The Canadian
Supplement should also be read in conjunction with the unaudited Consolidated Financial
Statements and Notes prepared in accordance with U.S. generally accepted accounting
principles (GAAP) (included in Item 1), and the audited Consolidated
Financial Statements and Notes included in our Annual Information Form for the fiscal year
ended February 28, 2005.

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

# CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

In addition to the critical accounting
estimates listed in the MD&A, we also use the following for Canadian GAAP purposes:

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

We apply CICA Handbook section 3870,
Stock-based Compensation and Other Stock-based payments, in accounting for our
stock option, stock purchase, and restricted share unit plans. Compensation expense for
options granted and shares issued under our stock option and restricted share unit plans
is recognized over their vesting period using the fair value method of accounting for
stock-based compensation. For purposes of computing the stock-based compensation, the fair
value of the options granted during the three and nine-month periods ended November 30,
2005 was estimated at the date of grant using a binomial lattice option-pricing model.
Prior to March 1, 2005, we used the Black-Scholes option-pricing model to estimate the
fair value of options at the grant date. Any consideration paid by employees on the
exercise of stock options is credited to capital stock. The discount from market price
offered to employees who purchase stock through our stock purchase plan is also recognized
as a compensation expense in the period when the shares are purchased.

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Exhibit 99.1

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

RESULTS OF OPERATIONS

|                                             |  | Three months endedNovember 30, | Nine months endedNovember 30,
|-------------------------------------------- |  | ------------------------------ | -----------------------------
|                                            
|                                             |  | 2005                           | 2004                         
|                                            
|Income before taxes  U.S. GAAP              |  | $36,137                        |                              
|Income before taxes  Canadian GAAP          |  | $35,434                        |                              
|                                             | 
|Income tax provision  U.S. GAAP             |  | $  7,869                       |                              
|Income tax provision  Canadian GAAP         |  | $11,475                        |                              
|                                             | 
|Net income per share diluted  U.S. GAAP     |  | $0.31                          |                              
|Net income per share diluted  Canadian GAAP |  | $0.26                          |                              

Acquired in-process
technology
Canadian GAAP requires capitalization
of the value assigned to acquired in-process technology and amortization of this value
over its estimated useful life. Under U.S. GAAP, this value is written off immediately.
The impact of this difference was to decrease income before taxes by $0.1 and $0.3 million
for the three months ended November 30, 2005 and November 30, 2004,
respectively, as compared to U.S. GAAP. For the nine-month periods ending November 30,
2005 and November 30, 2004, the impact of this difference was to decrease income before
taxes by $0.6 million and $0.8 million, respectively, as compared to U.S. GAAP.

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Exhibit 99.1

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

Stock-based compensation
Under U.S. GAAP, companies may choose
between the intrinsic value method and fair value method of accounting for stock-based
compensation. We have elected to account for stock-based compensation using the intrinsic
value method in accordance with APB 25 and to disclose the pro forma effect of recording
compensation expense under the fair value method. This disclosure can be found in Note 3
to the unaudited consolidated financial statements. For Canadian GAAP purposes, companies
are required to use the fair value method of accounting for stock-based compensation. The
impact of this difference for the three months ended November 30, 2005 and November 30,
2004 was to decrease income before taxes by $4.9 million and $5.0 million, respectively.
For the nine-month periods ending November 30, 2005 and November 30, 2004, the impact of
this difference was to decrease income before taxes by $13.2 million and $12.3 million,
respectively, as compared to U.S. GAAP.

Investment tax credits
Canadian GAAP requires that investment
tax credits be deducted from operating expense. Under U.S. GAAP, these amounts are
deducted from the income tax provision. The impact of this difference was to increase
income before taxes and the income tax provision by $4.2 million and $4.4 million for the
three months ended November 30, 2005 and November 30, 2004, respectively, with no
corresponding impact on net income, as compared to U.S. GAAP. For the nine-month periods
ended November 30, 2005 and November 30, 2004, the impact of this difference was to
increase income before taxes and the income tax provision by $14.0 million and $12.0
million, respectively, as compared to U.S. GAAP.

Deferred income taxes
The capitalization of in-process
technology created an additional deferred income tax liability on the Canadian GAAP
balance sheet as the capitalization of the in-process technology created a temporary
difference. The amortization of this balance decreased the Canadian GAAP income tax
provision by $0.1 million for the quarter ended November 30, 2004 and had an
immaterial effect for the quarter ended November 30, 2005, as compared to U.S. GAAP.
For the nine-month periods ended November 30, 2005 and November 30, 2004, the amortization
of this balance decreased the Canadian GAAP income tax provision by $0.2 million and $0.3
million, respectively, as compared to U.S. GAAP.

The expensing of stock-based
compensation creates a deferred tax asset for Canadian GAAP purposes as this expense is
deductible in certain jurisdictions when the options are exercised. Under U.S. GAAP, the
reduction in the tax liability is treated as part of the purchase price component of the
stock options and added to paid-in capital. The expensing of stock-based compensation
reduced the Canadian GAAP tax provision by $0.6 million in both the three month periods
ended November 30, 2005 and November 30, 2004, as compared to U.S. GAAP. For the nine
months ended November 30, 2005 and November 30, 2004, the reduction in the tax provision
was $1.6 million and $1.4 million, respectively.

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Exhibit 99.1

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

Derivative financial
instruments
Under Canadian GAAP, derivative
financial instruments that qualify for hedge accounting treatment may be recognized on the
balance sheet only to the extent that cash has been paid and or received together with
adjustments necessary to offset recognized gains or losses arising on the hedged items.
Under U.S. GAAP, such derivative financial instruments are recognized on the balance sheet
at fair value with a corresponding charge or credit recorded in other comprehensive income
for any portion not recognized in income. At November 30, 2005 and February 28, 2005,
there was $1.1 million and $0.3 million, respectively, included in accumulated other
comprehensive income related to the net unrealized loss on the Corporations cash
flow hedges. For Canadian GAAP, this amount was removed and applied against the accrued
liability related to the hedge.

75