----

|                                    |                                                |
|------------------------------------|-----------------------------------------------------|
| Paul Godfrey                       | Doug Lamb                                           |
| PresidentandChief ExecutiveOfficer | Chief Financial Officer andExecutive Vice President |

----

|   |   |
|--------|--------|

|   |   |
|--------|--------|

----

|                                                                   |   |   |     |   |               |   |               |   |   |
|------------------------------------------------------------------------|--------|--------|----------|--------|--------------------|--------|--------------------|--------|--------|
|                                                                   |   | 2014   |     | 2013   |               | 2012   |
|                                                                   |   |   |     |   | (revised - note 2) |   | (revised - note 2) |
| Revenues                                                               |   |   |     |   |               |   |               |   |   |
|   Printadvertising                                           |   |   | 375,457  |   |               |   | 445,547            |   |   |   | 514,987 |   |
|   Printcirculation                                           |   |   | 194,176  |   |               |   | 195,899            |   |   |   | 209,177 |   |
|   Digital                                                    |   |   | 88,023   |   |               |   | 91,606             |   |   |   | 89,076 |   |
|   Other                                                      |   |   | 16,599   |   |               |   | 18,531             |   |   |   | 18,637 |   |
| Totalrevenues                                                          |   |   | 674,255  |   |               |   | 751,583            |   |   |   | 831,877 |   |
| Expenses                                                               |   |   |     |   |               |   |               |   |   |   |   |   |
|   Compensation                                               |   |   | 281,085  |   |               |   | 321,224            |   |   |   | 348,608 |   |
|   Newsprint                                                  |   |   | 30,770   |   |               |   | 40,902             |   |   |   | 52,628 |   |
|   Distribution                                               |   |   | 101,794  |   |               |   | 107,905            |   |   |   | 123,872 |   |
|   Production                                                 |   |   | 37,671   |   |               |   | 28,270             |   |   |   | 29,989 |   |
|   Other operating                                            |   |   | 113,430  |   |               |   | 123,356            |   |   |   | 132,919 |   |
| Operatingincome before depreciation, amortization, impairment and      |   |   |     |   |               |   |               |   |   |   |   |   |
|   restructuring (note 3)                                     |   |   | 109,505  |   |               |   | 129,926            |   |   |   | 143,861 |   |
| Depreciation (note8)                                                   |   |   | 66,646   |   |               |   | 29,949             |   |   |   | 26,157 |   |
| Amortization (note9)                                                   |   |   | 39,080   |   |               |   | 43,325             |   |   |   | 43,566 |   |
| Impairments (notes 4, 8 and9)                                          |   |   | -        |   |               |   | 99,983             |   |   |   | - |   |
| Restructuring and other items (notes 11 and 13)                        |   |   | 39,285   |   |               |   | 34,171             |   |   |   | 35,355 |   |
| Operatingincome (loss)                                                 |   |   | (35,506  | )      |               |   | (77,502            | )      |   |   | 38,783 |   |
| Interest expense                                                       |   |   | 61,914   |   |               |   | 61,900             |   |   |   | 65,446 |   |
| Loss on debt repayment (note12)                                        |   |   | -        |   |               |   | -                  |   |   |   | 9,178 |   |
| Net financing expense relatingto employee benefit plans (note 13)      |   |   | 5,617    |   |               |   | 7,458              |   |   |   | 5,706 |   |
| (Gain) loss on disposal ofproperty and equipment and intangible assets |   |   | (257     | )      |               |   | (1,005             | )      |   |   | 258 |   |
| (Gain) loss on derivativefinancial instruments (note 5)                |   |   | (1,590   | )      |               |   | 7,306              |   |   |   | (8,632 | ) |
| Foreign currency exchange losses                                       |   |   | 6,271    |   |               |   | 7,065              |   |   |   | 6,383 |   |
| Loss beforeincome taxes                                                |   |   | (107,461 | )      |               |   | (160,226           | )      |   |   | (39,556 | ) |
| Provision for income taxes (note 16)                                   |   |   | -        |   |               |   | -                  |   |   |   | - |   |
| Net lossfrom continuing operations                                     |   |   | (107,461 | )      |               |   | (160,226           | )      |   |   | (39,556 | ) |
| Net earnings from discontinued operations, net of tax of nil (note 23) |   |   | -        |   |               |   | -                  |   |   |   | 13,523 |   |
| Net loss attributable to equity holders of the Company                 |   |   | (107,461 | )      |               |   | (160,226           | )      |   |   | (26,033 | ) |
|                                                                   |   |   |     |   |               |   |               |   |   |   |   |   |
| Loss pershare from continuing operations (note 14):                    |   |   |     |   |               |   |               |   |   |   |   |   |
| Basic                                                                  |   | $      | (2.67    | )      |               | $      | (3.98              | )      |   | $ | (0.98 | ) |
| Diluted                                                                |   | $      | (2.67    | )      |               | $      | (3.98              | )      |   | $ | (0.98 | ) |
|                                                                   |   |   |     |   |               |   |               |   |   |   |   |   |
| Earningsper share from discontinued operations (note 14):              |   |   |     |   |               |   |               |   |   |   |   |   |
| Basic                                                                  |   | $      | -        |   |               | $      | -                  |   |   | $ | 0.34 |   |
| Diluted                                                                |   | $      | -        |   |               | $      | -                  |   |   | $ | 0.34 |   |
|                                                                   |   |   |     |   |               |   |               |   |   |   |   |   |
| Loss pershare attributable to equity holders of the Company (note 14): |   |   |     |   |               |   |               |   |   |   |   |   |
| Basic                                                                  |   | $      | (2.67    | )      |               | $      | (3.98              | )      |   | $ | (0.65 | ) |
| Diluted                                                                |   | $      | (2.67    | )      |               | $      | (3.98              | )      |   | $ | (0.65 | ) |

----

|                                                                               |   |   |     |   |               |   |               |   |   |
|------------------------------------------------------------------------------------|--------|--------|----------|--------|--------------------|--------|--------------------|--------|--------|
|                                                                               |   | 2014   |     | 2013   |               | 2012   |
|                                                                               |   |   |     |   | (revised - note 2) |   | (revised - note 2) |
|                                                                               |   |   |     |   |               |   |               |   |   |
| Net lossattributable to equity holders of the Company                              |   |   | (107,461 | )      |               |   | (160,226           | )      |   |   | (26,033 | ) |
|                                                                               |   |   |     |   |               |   |               |   |   |   |   |   |
| Othercomprehensive income (loss) from continuing operations                        |   |   |     |   |               |   |               |   |   |   |   |   |
| Amounts subsequently reclassified to the statement of operations                   |   |   |     |   |               |   |               |   |   |   |   |   |
| Gainon valuation of derivative financial instruments, net of tax of nil            |   |   | 3,994    |   |               |   | 1,914              |   |   |   | 8,928 |   |
| Amounts not subsequently reclassified to the statement of operations               |   |   |     |   |               |   |               |   |   |   |   |   |
| Netactuarial gains (losses) on employee benefits, net of tax of nil (note 13)      |   |   | (20,692  | )      |               |   | 59,581             |   |   |   | (70,228 | ) |
| Gainon minimum funding liability of employee benefits, net of tax of nil (note 13) |   |   | -        |   |               |   | -                  |   |   |   | 4,146 |   |
| Othercomprehensive loss from discontinued operations                               |   |   |     |   |               |   |               |   |   |   |   |   |
| Amounts not subsequently reclassified to the statement of operations               |   |   |     |   |               |   |               |   |   |   |   |   |
| Net actuarial losses on employee benefits, net of tax of nil (note 13)             |   |   | -        |   |               |   | -                  |   |   |   | (376 | ) |
| Other comprehensive income (loss)                                                  |   |   | (16,698  | )      |               |   | 61,495             |   |   |   | (57,530 | ) |
| Comprehensive loss attributable to equity holders of the Company                   |   |   | (124,159 | )      |               |   | (98,731            | )      |   |   | (83,563 | ) |
|                                                                               |   |   |     |   |               |   |               |   |   |   |   |   |
|                                                                               |   |   |     |   |               |   |               |   |   |   |   |   |
| Totalcomprehensive loss attributable to equity holders of the Company:             |   |   |     |   |               |   |               |   |   |   |   |   |
| Continuing operations                                                              |   |   | (124,159 | )      |               |   | (98,731            | )      |   |   | (96,710 | ) |
| Discontinued operations                                                            |   |   | -        |   |               |   | -                  |   |   |   | 13,147 |   |
| Comprehensive loss attributable to equity holders of the Company                   |   |   | (124,159 | )      |               |   | (98,731            | )      |   |   | (83,563 | ) |

----

|                                                                        |   |   |     |   |               |   |
|-----------------------------------------------------------------------------|--------|--------|----------|--------|--------------------|--------|
|                                                                        |   | 2014   |     | 2013   |
|                                                                        |   |   |     |   | (revised - note 2) |
| ASSETS                                                                      |   |   |     |   |               |   |
| CurrentAssets                                                               |   |   |     |   |               |   |
|   Cash                                                                 |   |   | 30,490   |   |               |   | 40,812 |   |
|   Accounts receivable                                                  |   |   | 64,871   |   |               |   | 82,615 |   |
|   Inventory (note 7)                                                   |   |   | 2,294    |   |               |   | 3,234 |   |
|   Current portion of derivative financial instruments (notes 6 and 12) |   |   | -        |   |               |   | 1,411 |   |
|   Prepaid expenses and other assets                                    |   |   | 9,888    |   |               |   | 10,128 |   |
| Totalcurrent assets                                                         |   |   | 107,543  |   |               |   | 138,200 |   |
| Non-CurrentAssets                                                           |   |   |     |   |               |   |   |   |
|   Property and equipment (notes 4 and 8)                               |   |   | 155,007  |   |               |   | 223,173 |   |
|   Asset held-for-sale (note 8)                                         |   |   | 22,246   |   |               |   | 10,530 |   |
|   Derivative financial instruments (note 6)                            |   |   | 18,392   |   |               |   | 16,802 |   |
|   Other assets                                                         |   |   | 17       |   |               |   | 732 |   |
|   Intangible assets (notes 4 and 9)                                    |   |   | 287,789  |   |               |   | 323,760 |   |
|   Goodwill (note 4)                                                    |   |   | 149,600  |   |               |   | 149,600 |   |
| Total assets                                                                |   |   | 740,594  |   |               |   | 862,797 |   |
|                                                                        |   |   |     |   |               |   |   |   |
| LIABILITIESAND EQUITY                                                       |   |   |     |   |               |   |   |   |
| CurrentLiabilities                                                          |   |   |     |   |               |   |   |   |
|   Accounts payable and accrued liabilities (note 10)                   |   |   | 59,073   |   |               |   | 67,618 |   |
|   Provisions (note 11)                                                 |   |   | 15,629   |   |               |   | 26,097 |   |
|   Deferred revenue                                                     |   |   | 24,176   |   |               |   | 24,645 |   |
|   Current portion of long-term debt (note 12)                          |   |   | 12,500   |   |               |   | 12,500 |   |
| Totalcurrent liabilities                                                    |   |   | 111,378  |   |               |   | 130,860 |   |
| Non-CurrentLiabilities                                                      |   |   |     |   |               |   |   |   |
|   Long-term debt (note 12)                                             |   |   | 473,800  |   |               |   | 474,380 |   |
|   Other non-current liabilities (notes 13 and 15)                      |   |   | 143,157  |   |               |   | 121,817 |   |
|   Provisions (note 11)                                                 |   |   | 634      |   |               |   | 826 |   |
|   Deferred income taxes (note 16)                                      |   |   | 681      |   |               |   | 681 |   |
| Total liabilities                                                           |   |   | 729,650  |   |               |   | 728,564 |   |
|                                                                        |   |   |     |   |               |   |   |   |
| Equity                                                                      |   |   |     |   |               |   |   |   |
|   Capital stock (note 14)                                              |   |   | 371,132  |   |               |   | 371,132 |   |
|   Contributed surplus (note 15)                                        |   |   | 9,890    |   |               |   | 9,020 |   |
|   Deficit                                                              |   |   | (370,078 | )      |               |   | (241,925 | ) |
|   Accumulated other comprehensive loss                                 |   |   | -        |   |               |   | (3,994 | ) |
| Total equity                                                                |   |   | 10,944   |   |               |   | 134,233 |   |
| Total liabilities and equity                                                |   |   | 740,594  |   |               |   | 862,797 |   |

| Signed       | Signed       |
|--------------|--------------|
| Paul Godfrey | Rod Phillips |
| Director     | Chair        |

----

|                                                                     |   |          |    |
|--------------------------------------------------------------------------|--------|---------------|---------|
|                                                                     |   | 2014          |
|                                                                     |   | Capital stock |    | Contributed surplus |   | Deficit |   | Accumulated other comprehensive loss |   | Total Equity |
| Balance as at August 31, 2013 (revised - note 2)                         |   |          | 371,132 |   |   |   | 9,020 |   |   |   | (241,925 | ) |   |   | (3,994 | ) |   |   | 134,233 |   |
| Net loss attributable toequity holders of the Company                    |   |          | -       |   |   |   | - |   |   |   | (107,461 | ) |   |   | - |   |   |   | (107,461 | ) |
| Other comprehensive income (loss)                                        |   |          | -       |   |   |   | - |   |   |   | (20,692 | ) |   |   | 3,994 |   |   |   | (16,698 | ) |
| Comprehensive income (loss) attributable to equityholders of the Company |   |          | -       |   |   |   | - |   |   |   | (128,153 | ) |   |   | 3,994 |   |   |   | (124,159 | ) |
| Share-based compensation plans (note 15)                                 |   |          | -       |   |   |   | 870 |   |   |   | - |   |   |   | - |   |   |   | 870 |   |
| Balance as at August 31, 2014                                            |   |          | 371,132 |   |   |   | 9,890 |   |   |   | (370,078 | ) |   |   | - |   |   |   | 10,944 |   |
|                                                                     |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                     |   |              |    |                |   |    |   |                                 |   |         |     |   |   |   |   |
|--------------------------------------------------------------------------|--------|-------------------|---------|---------------------|--------|---------|--------|--------------------------------------|--------|--------------|----------|--------|--------|--------|--------|
|                                                                     |   | 2013              |
|                                                                     |   | (revised - note2) |
|                                                                     |   | Capital stock     |    | Contributed surplus |   | Deficit |   | Accumulated other comprehensive loss |   | Total Equity |
| Balance as at August 31, 2012                                            |   |              | 371,132 |                |   |    | 7,888  |                                 |   |         | (141,280 | )      |   |   | (5,908 | ) |   |   | 231,832 |   |
| Net loss attributable toequity holders of the Company                    |   |              | -       |                |   |    | -      |                                 |   |         | (160,226 | )      |   |   | -      |   |   |   | (160,226 | ) |
| Other comprehensive income                                               |   |              | -       |                |   |    | -      |                                 |   |         | 59,581   |   |   |   | 1,914  |   |   |   | 61,495 |   |
| Comprehensive income (loss) attributable to equityholders of the Company |   |              | -       |                |   |    | -      |                                 |   |         | (100,645 | )      |   |   | 1,914  |   |   |   | (98,731 | ) |
| Share-based compensation plans (note 15)                                 |   |              | -       |                |   |    | 1,132  |                                 |   |         | -        |   |   |   | -      |   |   |   | 1,132 |   |
| Balance as at August 31, 2013                                            |   |              | 371,132 |                |   |    | 9,020  |                                 |   |         | (241,925 | )      |   |   | (3,994 | ) |   |   | 134,233 |   |
|                                                                     |   |              |    |                |   |    |   |                                 |   |         |     |   |   |   |   |   |   |   |   |   |
|                                                                     |   |              |    |                |   |    |   |                                 |   |         |     |   |   |   |   |   |   |   |   |   |

|                                                                     |   |              |    |                |   |    |   |                                 |   |         |     |   |   |   |    |
|--------------------------------------------------------------------------|--------|-------------------|---------|---------------------|--------|---------|--------|--------------------------------------|--------|--------------|----------|--------|--------|--------|---------|
|                                                                     |   | 2012              |
|                                                                     |   | (revised - note2) |
|                                                                     |   | Capital stock     |    | Contributed surplus |   | Deficit |   | Accumulated other comprehensive loss |   | Total Equity |
| Balance as at August 31, 2011                                            |   |              | 371,132 |                |   |    | 5,602  |                                 |   |         | (48,789  | )      |   |   | (14,836 | ) |   |   | 313,109 |   |
| Net loss attributable toequity holders of the Company                    |   |              | -       |                |   |    | -      |                                 |   |         | (26,033  | )      |   |   | -       |   |   |   | (26,033 | ) |
| Other comprehensive income (loss)                                        |   |              | -       |                |   |    | -      |                                 |   |         | (66,458  | )      |   |   | 8,928   |   |   |   | (57,530 | ) |
| Comprehensive income (loss) attributable to equityholders of the Company |   |              | -       |                |   |    | -      |                                 |   |         | (92,491  | )      |   |   | 8,928   |   |   |   | (83,563 | ) |
| Share-based compensation plans (note 15)                                 |   |              | -       |                |   |    | 2,286  |                                 |   |         | -        |   |   |   | -       |   |   |   | 2,286 |   |
| Balance as at August 31, 2012                                            |   |              | 371,132 |                |   |    | 7,888  |                                 |   |         | (141,280 | )      |   |   | (5,908  | ) |   |   | 231,832 |   |

----

|                                                                                                             |   |   |     |   |               |   |               |   |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------------------|--------|--------------------|--------|--------|
|                                                                                                             |   | 2014   |     | 2013   |               | 2012   |
| CASH GENERATED(UTILIZED) BY:                                                                                     |   |   |     |   | (revised - note 2) |   | (revised - note 2) |
|                                                                                                             |   |   |     |   |               |   |               |   |   |
| OPERATINGACTIVITIES                                                                                              |   |   |     |   |               |   |               |   |   |
| Net loss attributable toequity holders of the Company                                                            |   |   | (107,461 | )      |               |   | (160,226           | )      |   |   | (26,033 | ) |
| Items not affectingcash:                                                                                         |   |   |     |   |               |   |               |   |   |   |   |   |
|    Depreciation (note 8)                                                                          |   |   | 66,646   |   |               |   | 29,949             |   |   |   | 26,320 |   |
|    Amortization (note 9)                                                                          |   |   | 39,080   |   |               |   | 43,325             |   |   |   | 43,621 |   |
|    Impairments (notes 4, 8 and 9)                                                                 |   |   | -        |   |               |   | 99,983             |   |   |   | - |   |
|    (Gain) loss on derivative financial instruments (note 5)                                       |   |   | (1,590   | )      |               |   | 7,306              |   |   |   | (22,414 | ) |
|    Non-cash interest                                                                              |   |   | 5,587    |   |               |   | 4,114              |   |   |   | 12,831 |   |
|    Non-cash loss on debt repayment (note 12)                                                      |   |   | -        |   |               |   | -                  |   |   |   | 9,178 |   |
|    (Gain) loss on disposal of property and equipment and intangible assets                        |   |   | (257     | )      |               |   | (1,005             | )      |   |   | 258 |   |
|    Non-cash foreign currency exchange losses                                                      |   |   | 6,323    |   |               |   | 6,879              |   |   |   | 5,721 |   |
|    Gain on sale of discontinued operations (note 23)                                              |   |   | -        |   |               |   | -                  |   |   |   | (17,109 | ) |
|    Share-based compensation plans and other long-term incentive plan expense (recovery) (note 15) |   |   | 1,376    |   |               |   | 1,386              |   |   |   | (2,459 | ) |
|    Net financing expense relating to employee benefit plans (note 13)                             |   |   | 5,617    |   |               |   | 7,458              |   |   |   | 6,243 |   |
|    Non-cash compensation expense of employee benefit plans (note 13)                              |   |   | -        |   |               |   | 2,587              |   |   |   | - |   |
| Employee benefit funding inexcess of compensation expense (note 13)                                              |   |   | (7,151   | )      |               |   | -                  |   |   |   | (24,381 | ) |
| Settlement of foreign currencyinterest rate swap designated as a cash flow hedge (note 12)                       |   |   | 6,149    |   |               |   | (8,976             | )      |   |   | - |   |
| Net change in non-cash operating accounts (note 21)                                                              |   |   | 907      |   |               |   | 5,567              |   |   |   | 30,765 |   |
| Cash flows from operating activities                                                                             |   |   | 15,226   |   |               |   | 38,347             |   |   |   | 42,541 |   |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
| INVESTINGACTIVITIES                                                                                              |   |   |     |   |               |   |               |   |   |   |   |   |
| Net proceeds received on thesale of discontinued operations (note 23)                                            |   |   | -        |   |               |   | -                  |   |   |   | 87,340 |   |
| Net proceeds from the sale ofproperty and equipment, intangible assets and assets held-for-sale                  |   |   | 306      |   |               |   | 25,925             |   |   |   | 4 |   |
| Additions to property andequipment (note 8)                                                                      |   |   | (10,245  | )      |               |   | (7,566             | )      |   |   | (8,227 | ) |
| Additions to intangible assets (note 9)                                                                          |   |   | (3,109   | )      |               |   | (5,932             | )      |   |   | (6,732 | ) |
| Cash flows from investing activities                                                                             |   |   | (13,048  | )      |               |   | 12,427             |   |   |   | 72,385 |   |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
| FINANCINGACTIVITIES                                                                                              |   |   |     |   |               |   |               |   |   |   |   |   |
| Proceeds from the issuance oflong-term debt (note 12)                                                            |   |   | -        |   |               |   | -                  |   |   |   | 250,000 |   |
| Repayment of long-term debt onrefinancing (note 12)                                                              |   |   | -        |   |               |   | -                  |   |   |   | (238,268 | ) |
| Repayment of long-term debt(note 12)                                                                             |   |   | (12,500  | )      |               |   | (32,040            | )      |   |   | (108,310 | ) |
| Debt issuance costs                                                                                              |   |   | -        |   |               |   | (111               | )      |   |   | (6,642 | ) |
| Cash flows from financing activities                                                                             |   |   | (12,500  | )      |               |   | (32,151            | )      |   |   | (103,220 | ) |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
| Net change incash                                                                                                |   |   | (10,322  | )      |               |   | 18,623             |   |   |   | 11,706 |   |
| Cash at beginning of period                                                                                      |   |   | 40,812   |   |               |   | 22,189             |   |   |   | 10,483 |   |
| Cash at end of period                                                                                            |   |   | 30,490   |   |               |   | 40,812             |   |   |   | 22,189 |   |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
|                                                                                                             |   |   | 2014     |   |               |   | 2013               |   |   |   | 2012 |   |
|                                                                                                             |   |   |     |   |               |   |               |   |   |   |   |   |
| Supplemental disclosure of operating cashflows                                                                   |   |   |     |   |               |   |               |   |   |   |   |   |
|   Interest paid                                                                                             |   |   | 57,236   |   |               |   | 53,173             |   |   |   | 60,080 |   |
|   Income taxes paid                                                                                         |   |   | -        |   |               |   | -                  |   |   |   | - |   |

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Employee future benefitsThe cost of defined benefit pension benefit plans, post-retirement benefit plans and other long-term employee benefit plans and the present value of the defined benefitobligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions including the discount rate to measure the net defined benefit obligation and mortality rates, among others.  Due to thecomplexity of the actuarial valuations and the long-term nature of employee future benefits, the corresponding obligation is highly sensitive to changes in assumptions.  Discount rates are reviewed at each reporting date and correspondingadjustments to the net defined benefit obligation are recognized in other comprehensive income and deficit.  In addition, during the year ended August 31, 2014, the Canadian Institute of Actuaries issued new mortality tables for use in thevaluation of Canadian pension and benefit plans.  As a result, during the year ended August 31, 2014, the Company modified the mortality tables used to value the defined benefit pension benefit and post-retirement benefit obligations whichresulted in an actuarial loss of $15.6 million recorded in other comprehensive income with an offsetting increase in other non-current liabilities.  The change in the mortality rate assumptions is expected to result in increased fundingvaluation obligations as well as increased defined benefit plan expense in future years.  Additional information on the Company’s employee benefit plans is contained in note 13.The followingarea requires management to use significant judgements apart from those involving estimates:Determination of useful lives for the depreciationand amortization of assets with finite livesFor each class of assets with finite lives, management has to determine over which period the Company will consume the assets future economic benefits.  Thedetermination of such periods and if necessary, the subsequent revision of such periods, involves judgement and has an impact on the depreciation and amortization recorded in the consolidated statements of operations. The Company takes into accountindustry trends and Company specific factors, including changing technologies and expectations for the in-service period of assets, when determining their respective useful lives.(e)   Disposals of non-current assetsand discontinued operationsNon-current assets are classified as held for sale if the carrying amount will be recovered principally through a sale transaction rather than through continued use, they areavailable for sale in their present condition and such sale is considered highly probable.  The criteria for a sale to be considered highly probable includes a firm decision by the appropriate level of management or the Board to dispose ofa business or a group of assets, such business or group of assets must be actively marketed for a price that is reasonable in relation to their current market value and there must be an expectation that such disposal will be completed within atwelve month period.  Assets held for sale are carried at the lower of their carrying amount or fair value less costs of disposal.  Assets held for sale are classified as discontinued operations if the operations and cash flowscan be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the Company and they represent a separate major line of business or geographical area of operations, or are part of a single coordinated plan todispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired with the view to resell.   11  (f)    Foreign currencytranslationThese consolidated financial statements are presented in Canadian dollars, the Company’s functional and reporting currency.  As at the date of the statement offinancial position, monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars using the foreign currency exchange rate in effect at that date.  Revenues and expense items are translated at theforeign currency exchange rate in effect when the transaction occurred.  The resulting foreign currency exchange gains and losses are recognized in the statement of operations in foreign currency exchange (gains) losses.(g)   CashCash iscomposed of cash on hand and current balances with banks.(h)   Borrowing costsBorrowing costs consist of interest and other costs that the Companyincurs in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale arecapitalized as part of the cost of the asset. All other borrowing costs are expensed in the period they are incurred in interest expense in the statement of operations.(i)    Property andequipmentProperty and equipment are recorded at historical cost.  Historical cost includes purchase cost, expenditures that are directly attributable to bringing the asset tothe location and condition necessary for it to be capable of operating in the manner intended by management, and borrowing costs if applicable.Depreciation is provided for on a straight line basis over the followinguseful lives:  AssetsEstimated useful life    Buildings10 - 40 yearsLeaseholds3 - 20 yearsComputer hardware3 - 5 yearsMachinery and equipment5 - 20 yearsThe depreciation method estimates of useful lives and residual valuesascribed to property and equipment are reviewed at least at each financial year end and if necessary depreciation is adjusted for on a prospective basis.   12  (j)    Intangible assetsFinite life intangibles(i) SoftwareCosts ofinternally generated software are composed of all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Internally generated software consists primarily ofinternal costs in connection with the development of software to be used internally or for providing services to customers.  All costs incurred during theresearch phase are expensed as incurred.  Development costs that are attributable to the design and testing are recognized as intangible assets if the asset can be separately identified, it is probable the asset will generate futureeconomic benefits, the development cost can be measured reliably, the project is technically feasible and the project will be completed with a view to use the asset.Software costs are amortized using the straight line method ofamortization over their estimated useful lives, which range from 2 to 10 years.  The depreciation method and estimates of useful lives ascribed to software are reviewed at least at each financial year end and if necessary amortization isadjusted on a prospective basis.(ii) Other identifiable intangible assetsUpon acquisition, other identifiable intangible assets are recorded atcost and are carried at cost less accumulated amortization.  Other identifiable intangible assets with finite lives are amortized using the straight-line method of amortization over their estimated useful lives, as follows:  Other identifiable intangible assets with finite livesEstimated useful life    Subscribers5 yearsCustomerrelationships4-5 yearsNon-newspaper domain names15 years The depreciation method and estimates of useful lives ascribed to otheridentifiable intangible assets are reviewed at least at each financial year end and if necessary amortization is adjusted for on a prospective basis.Costs associated with purchasing and developing content are expensed asincurred, except for content development on the Company's website which is capitalized when such costs meet the criteria for capitalization.Indefinite life intangiblesIntangibleassets with indefinite lives are not amortized.  These include newspaper mastheads and certain domain names related to the newspaper online websites.  The assessment of indefinite life is reviewed each period to determine whetherthe indefinite life assumption continues to be supportable.  If it is deemed unsupportable the change in useful life from indefinite to finite life is made and amortization is recognized on a prospective basis.   13  (k)  Business combinations andgoodwillThe Company uses the acquisition method of accounting to record business combinations.  The acquisition method of accounting requires the Company to recognize,separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree measured at the acquisition-date fair values.  The consideration transferred shall be measured at fairvalue calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, the liabilities assumed by the Company and any equity interests issued by the Company.  Contingent consideration is recognized aspart of the consideration transferred.  Goodwill as of the acquisition date is measured as the excess of the consideration transferred and the amount of any non-controlling interest acquired over the net of the acquisition-date amounts ofthe identifiable assets acquired and the liabilities assumed, measured at fair value.  Goodwill acquired through a business combination is allocated to the CGU (or group of CGUs) that are expected to benefit from the synergies of thebusiness combination. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.  Acquisition related costs are expensed in the period they are incurred except for those costs to issue equity securitieswhich are offset against the related equity instruments and those costs to issue debt which are offset against the corresponding debt and amortized using the effective interest method.  Acquisition related costs include advisory, legal,accounting, valuation and other professional or consulting fees; and costs of registering and issuing debt and securities.(l)    ImpairmentsImpairmentsare recorded when the recoverable amount of an asset or CGU is less than its carrying amount. The recoverable amount is the higher of an assets or CGUs fair value less costs of disposal or its value in use, and is determined for an individual asset,unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.  When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount.  Impairment losses, other than those relating to goodwill, are evaluated for potential reversals when events or changes in circumstances warrant such consideration.(i)Non-financial assetsThe carrying values of non-financial assets with finite lives, except inventories, deferred tax assets and employee benefits, are assessed for impairment whenever events orchanges in circumstances indicate that their carrying amounts may not be recoverable.  Additionally, intangible assets with indefinite lives, composed of mastheads and newspaper domain names are included in their related CGU, and aretested annually for impairment or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash inflows (CGUs).  The Company has identified each individual newspaper as a CGU because each newspaper has separately identifiable independent cash inflows.  Any corporate assets and cash flows areallocated to the respective CGUs.  Non-financial assets other than goodwill that have incurred an impairment in previous periods are reviewed for the possible reversal of the impairment at each reporting date.   14  (ii) GoodwillGoodwill isreviewed for impairment annually or more frequently if there are indications that impairment may have occurred.  For the purpose of impairment testing, goodwill is allocated to each CGU (or group of CGUs) based on the level at whichmanagement monitors goodwill, however not higher than an operating segment.  Impairment is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates.  Accordingly, management hasallocated its goodwill to its single operating segment, the Newspaper Operating Segment, which is at the entity level, and the level at which goodwill is monitored, herein referred to as the Goodwill CGU.  Impairment losses relating togoodwill cannot be reversed in future periods.(m)  Revenue recognitionRevenue is measured at the fair value of the consideration receivedor receivable net of any discounts, if applicable.  The Company bases any estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.Revenuefrom the sale of goods is recognized when the following criteria have been met:●  the significant risksand rewards of ownership are transferred to customers, and the Company retains neither managerial involvement nor effective control,●  the amount of revenuecan be measured reliably, and●  the receipt of economic benefit is probable and the costs incurred can be measuredreliably.Revenue from the rendering of services is recognized when the following criteria have been met:●  the amount of revenue can be measured reliably,●  the receipt ofeconomic benefit is probable, and●  the stage of completionof the transaction and the costs incurred can be measured reliably.Print advertising revenue is recognized when advertisements are published. Print circulation revenue includes home-delivery subscriptions and single-copy sales at newsstands andvending machines.  Print circulation revenue from subscriptions is recognized on a straight-line basis over the term of the subscriptions.  Print circulation revenue from single-copy sales at newsstands and vending machines, netof a provision for estimated returns based on historical rates of returns, is recognized when the newspapers are delivered. Digital revenue is recognized when advertisements are placed on the Company’s websites or, with respect to certainonline advertising, each time a user clicks on certain ads.  Digital revenue also includes subscription revenue for business research and corporate financial information services and is recognized on a straight-line basis over the term ofthe subscriptions or contracts.  Other revenue is recognized when the related service or product has been delivered.Amounts received relating to services to be performed in future periodsand sale of goods that require future performance are recorded as deferred revenue on the statement of financial position.   15  (n)   InventoryInventory,consisting primarily of printing materials, is valued at the lower of cost, using the first-in-first out cost formula, and net realizable value, where net realizable value is determined to be the estimated selling price in the ordinary course ofbusiness, less estimated costs of completion and estimated costs necessary to make the sale.  Reversals of previous write-downs to net realizable value are required when there is a subsequent increase in the value ofinventories.(o)   Share-based compensation and other long-term incentive plansThe Company has a share option plan and a restricted share unit planthat will be settled through the issuance of shares of Postmedia or through cash at the option of the Company and a deferred share unit plan that will be settled with cash.(i) Share option planThe Companyrecognizes compensation expense for all share options granted based on the fair value of the option on the date of grant, net of estimated forfeitures, using the Black-Scholes option pricing model.  The fair value of the options isrecognized as compensation expense over the vesting period of the options, with a corresponding credit to contributed surplus.  The contributed surplus balance is reduced as options are exercised through a credit to capital stock when theoptions are exercised.(ii) Restricted share unit planThe Company recognizes compensation expense for all restricted shareunits granted based on the fair value of the Company’s shares on the issuance date of each restricted share unit grant net of estimated forfeitures.  The fair value of the restricted share units is recognized as compensation expense,over the vesting period of each restricted share unit grant, with a corresponding credit to contributed surplus.  Compensation expense is not adjusted for subsequent changes in the fair value of the Company’s shares.  Thecontributed surplus balance is reduced as units are exercised through a credit to capital stock.(iii) Deferred share unit planThe Companyrecognizes compensation expense for its deferred share unit plan based on the fair value of the Company’s shares. The deferred share units outstanding are re-measured at each reporting period until settlement, using the fair value of theshares of the Company.  The fair value of the deferred share units is recognized as compensation expense, over the vesting period of each deferred share unit grant, in operating expenses with a corresponding credit to other non-currentliabilities.The Company uses the graded vesting method to calculate compensation expense for all share-based compensation and other long-term incentive plans.   16  (p)   Financial instrumentsFinancialinstruments are classified as fair value through profit or loss, loans and receivables or other financial liabilities.(i) Fair value through profit or lossFinancialinstruments are classified as fair value through profit or loss if acquired principally for the purpose of selling in the short-term, or if so designated by management and it eliminates or significantly reduces a measurement or recognitioninconsistency, or is managed and its performance is evaluated on a fair value basis. Assets in this category principally include embedded derivatives and derivative financial instruments which do not qualify for hedgeaccounting.  Financial instruments classified as fair value through profit or loss are carried at fair value with changes recognized in the statement of operations.(ii) Loans and receivablesLoans andreceivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets in this category include accounts receivable and cash.  Loans and receivables are initially recognized atfair value plus transaction costs and subsequently carried at amortized cost using the effective interest method, less a provision for impairment. Loans and receivables are included in current assets, except for those with maturities greater thantwelve months after the end of the reporting period, which are classified as non-current assets.(iii) Other financial liabilitiesOtherfinancial liabilities include accounts payable and accrued liabilities and long-term debt. Other financial liabilities are recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost using theeffective interest method. Other financial liabilities are classified as current liabilities if payment is due within twelve months; otherwise, they are classified as non-current liabilities.  Financing fees related to revolving debtarrangements are initially recognized as an other asset and amortized over the term of the arrangement in interest expense.The effective interest rate is the rate that exactly discounts theestimated future cash flows through the expected life of the financial instrument to its net carrying amount.(q)   Derivative financial instruments andhedgingThe Company uses derivative financial instruments to manage its exposure to fluctuations in foreign currency rates and interest rates.  Derivative financial instrumentsare initially recognized at fair value on the date a contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative financial instrument isdesignated as a hedging instrument and the nature of the item being hedged.  The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its strategy for using hedgesand its risk management objectives. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions are highly effective in offsettingchanges in fair values or cash flows of hedged items.  Non-performance risk, including credit risk, is considered when determining the fair value of derivative financial instruments.  The Company does not hold or use anyderivatives instruments for trading purposes.   17  The Companyenters into the following types of derivative financial instruments:Cash flow hedgesPeriodically, the Company uses cash flow hedges to hedge the foreigncurrency rate exposure on interest and principal payments on foreign currency denominated debt and uses cash flow hedges to hedge foreign currency and interest rate exposure on variable interest rates and principal payments on foreign currencydenominated debt.  The effective portion of a cash flow hedge is reported in other comprehensive income until it is recognized in the statement of operations during the same period in which the hedged item affects income, while theineffective portion is immediately recognized in the statement of operations.  When a hedged item ceases to exist or cash flow hedge accounting is terminated, the amounts previously recognized in accumulated other comprehensive income arereclassified to the statement of operations when the variability in the cash flows of the hedged item affect income.  Cash flows associated with derivative contracts accounted for as hedges are classified in the same category in thestatement of cash flows as the item being hedged. Derivative financial instruments that do not qualifyfor hedge accountingPeriodically, the Company uses derivative financial instruments that hedge the fair value exposure on certain debt resulting from changes in the US and Canadian variable baserates and the foreign currency rate exposure on interest and principal payments on foreign currency denominated debt.  These derivative financial instruments are not designated as hedges for accounting purposes and are measured at fairvalue in the statement of financial position. Embedded derivativesAn embeddedderivative is a component of a hybrid instrument that also includes a non-derivative host contract, with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.  If certainconditions are met, an embedded derivative is separated from the host contract and measured at fair value in the statement of financial position.Changes in the fair value of both derivative financial instruments thatdo not qualify for hedge accounting and embedded derivatives are recorded in the statement of operations as gain or loss on derivative financial instruments.(r)   ProvisionsProvisionsrepresent liabilities of the Company for which the amount or timing is uncertain.  Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow ofresources will be required to settle the obligation, and the amount can be reliably estimated.  Provisions are measured at the current best estimate required to settle the obligation and when necessary the use of estimation techniques areutilized.  If the effect of the time value of money is material the provision is measured at the present value of the expected expenditures required to settle the obligation using a discount rate that reflects current market assessments ofthe time value of money and the risks specific to the obligation.  The increase in the provision due to the passage of time is recognized as interest expense in the statement of operations.   18  (s)   Employee benefits(i)    Pension and post-retirement obligationsThe Company maintains a number of defined contribution and definedbenefit pension and defined benefit post-retirement plans.  For defined benefit plans, the defined benefit obligation associated with pension and post-retirement benefits earned by employees is actuarially determined on an annual basis byindependent actuaries using the projected unit credit method.  The determination of benefit expense requires assumptions such as the discount rate to measure the net defined benefit obligations, expected rate of future compensationincreases, retirement ages of employees, expected health care cost trend rate and other factors as applicable. The asset or liability recognized in the statement of financial position is the present value of the defined benefit obligation less thefair value of plan assets at the end of the reporting period. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Canadian corporate AA bonds that have terms tomaturity which are similar to the terms of the related liability.  The estimate of the expected long-term rate of return on plan assets is based on the discount rate of the defined benefit obligation.  All actuarial gains andlosses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are recognized in other comprehensive income and then immediately transferred to deficit.  Past service costs from planamendments are recognized immediately in compensation expense in the statement of operations. The current service cost and past service cost of employee benefits expense is recorded in compensation expense in the statement ofoperations.  The financing expenses on the benefit obligations are presented in net financing expense relating to employee benefit plans in the statement of operations. Gains and losses on curtailments or settlements are recognized in theperiod in which the curtailment or settlement occurs in restructuring and other items in the statement of operations.The Company’s defined benefit pension plans are subject to minimumfunding requirements. The liability in respect of minimum funding requirements is determined using the projected minimum funding requirements based on management's best estimates of the actuarially determined funded status of the plan, marketdiscount rates and salary escalation estimates. The liability related to the minimum funding requirement and any subsequent re-measurement of that liability is recognized immediately in other comprehensive income and then immediately transferred todeficit without subsequent reclassification to the statement of operations.For defined contribution plans, the Company pays contributions to the plan on a contractual basis. The Company has no further payment obligations once the contributions have beenpaid. The contributions are recognized as an expense in the period when they are earned by the employees.(ii)   Other long-term benefitsThe Companymaintains a number of other long-term employee benefit plans that are to be settled more than twelve months after the service was provided that entitled the employee to the benefit.  These plans are accounted for similarly to the definedbenefit pension and post-retirement plans with the exception that actuarial gains and losses are recognized immediately in the statement of operations.   19  (iii)  Termination benefitsTerminationbenefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary termination in exchange for these benefits.  The Company recognises termination benefits when itis demonstrably committed to a termination, which is satisfied when the Company has a detailed formal plan, approved by management, to terminate the employment of current employees without possibility of withdrawal.  In the case of anoffer made to encourage voluntary termination, the termination benefits are measured based on the number of employees expected to accept the offer.  If the effect of the time value of money is material, benefits falling due more thantwelve months after the end of the reporting period are discounted to present value.(t)    Income taxesCurrent incometaxes are recognized with respect to amounts expected to be paid or recovered for current and prior periods under the tax rates and laws that have been enacted or substantively enacted as at the date of the statement of financialposition.Deferred income taxes are accounted for using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the estimated taxconsequences attributable to differences between the carrying amounts in the consolidated financial statements and the tax bases of assets and liabilities.  However, deferred tax is not recognized if it arises from the initial recognitionof goodwill or the initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable income or loss.  Deferred income tax assets andliabilities are measured using enacted or substantively enacted tax rates, as at the date of the statement of financial position, in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of achange in tax rates on deferred income tax assets and liabilities is recognized in income in the period that includes the substantive enactment date. A deferred tax asset is recognized initially when it is probable that future taxable income will besufficient to use the related tax benefits and may be subsequently reduced, if necessary, to an amount that is probable of being realized.In general, deferred tax is recognized in respect of temporarydifferences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.Tax expense or recovery is recognized in other comprehensive income orotherwise directly in equity to the extent that it relates to items that are recognized in other comprehensive income or directly in equity.Deferred tax assets and liabilities are presented asnon-current.(u)  Tax creditsRefundable tax credits related to digital media development products arerecognized when there is reasonable assurance that the Company has complied with the conditions associated with the relevant government program.  These tax credits are recorded as either a reduction to the carrying amount of the relatedasset or as a recovery in the statement of operations.  Tax credits recoverable are recorded as other assets in the statement of financial position.   20  (v)   LeasesLeasingagreements which transfer to the Company substantially all the benefits and risks of ownership of an asset are treated as finance leases, as if the asset had been purchased outright. The assets are included in property and equipment and the relatedliabilities are shown as obligations under finance leases.  Assets held under finance leases are depreciated on a basis consistent with similar owned assets or the lease term if shorter. The interest element of the obligations underfinance leases is included in the statement of operations within interest expense.All other leases are operating leases and the rental costs are chargedto the statement of operations on a straight-line basis over the lease term.(w)   Earnings per shareBasicearnings per share are calculated using the daily weighted average number of shares outstanding during the period.Diluted earnings per share are calculated using the daily weightedaverage number of shares that would have been outstanding during the period had all potential common shares been issued at the beginning of the period, or when the underlying options were granted, if later.  The treasury stock method isemployed to determine the incremental number of shares that would have been outstanding had the Company used proceeds from the exercise of the options to acquire shares provided the shares are not anti-dilutive.Changes in accounting policiesThe Company has adopted the following new and amended standardseffective September 1, 2013.  The comparative consolidated financial statements have been revised as applicable to reflect the adopted standards as described below.(i) IFRS 10 – Consolidated FinancialStatementsIFRS 10 – Consolidated Financial Statements replaces SIC-12 Consolidation – Special Purpose Entities and parts of IAS 27 – Consolidated and Separate FinancialStatements and introduces a new definition of control that is intended to provide more consistent guidance in the determination of whether control exists and whether or not an entity should be included within the consolidated financialstatements.  The adoption of this standard did not have an impact on the consolidated financial statements.(ii) IFRS 13– Fair Value MeasurementIFRS 13 – Fair Value Measurement establishes a single source ofguidance for fair value measurement across all IFRS standards.  IFRS 13 defines fair value, provides guidance on measurement and introduces certain disclosure requirements.  The Company adopted IFRS 13 on September 1, 2013 on aprospective basis.  The adoption of IFRS 13 did not result in any measurement adjustments or changes to the valuation techniques used by the Company.  The Company has included the required disclosures in note 18 of thesefinancial statements.   21  (iii) IAS 19 – Employee Benefits(Amended)IAS 19 – Employee Benefits (Amended) includes a number of changes related to the recognition and measurement ofdefined benefit employee benefit plans. The amendments introduce a net interest approach that replaces the expected return on plan assets and interest costs on the defined benefitobligation with a single net interest component which will be determined based on the application of the discount rate on the net defined benefit obligation.  The amendments also require the recognition of all past service costs inprofit or loss when the employee benefit plan is amended.  The Company adopted IAS 19 on September 1, 2013 on a retrospective basis back to September 1, 2011.  The adoption of IAS 19 has resulted in an adjustment to the openingdeficit as at September 1, 2011 to reflect previously unrecognized past service costs. Additionally, the comparative figures in these consolidated financial statements have been revised asillustrated in the tables below to reflect the amended standard.The amended standard also clarifies when an employer offers voluntary termination benefits that the obligating event under such termination benefits is deemed to have occurredwhen an entity can no longer withdraw the offer.  The following tables provide the impact on the comparative financial information in the consolidated financial statements for the years ended August 31, 2014, 2013 and2012: Effect oncomprehensive loss attributable to equity holders of the Company                              2013  2012              Net loss attributable toequity holders of the Company as previously reported    (153,829)    (23,222)                  IAS 19 amendments increasingreported net loss                Compensation    (475)    (475)Net financing expense relatingto employee benefit plans    (5,922)    (1,806)Net loss from discontinued operations, net of tax of nil    -      (530)Total IAS 19 amendments increasing reported net loss    (6,397)    (2,811)Net loss attributable to equity holders of the Company revised (1)    (160,226)    (26,033)                  Comprehensive lossattributable to equity holders of the Company as previously reported    (98,979)    (83,811)                  IAS 19 amendments(increasing) decreasing reported comprehensive income                Impact of IAS 19 amendments tonet loss    (6,397)    (2,811)Net actuarial gains onemployee benefits    6,645      2,529  Net actuarial losses on employee benefits net of tax of nil    -      530  Total IAS 19 amendments decreasing reported comprehensive loss    248      248  Comprehensive loss attributable to equity holders of the Company revised    (98,731)    (83,563)(1) Theseadjustments increased basic and diluted net loss per share attributable to equity holders of the Company for the years ended August 31, 2013 and 2012 by $0.16 per share and $0.07 per share, respectively.     22   Effect on the consolidated statements offinancial position                   Increase August 31, 2013 August 31, 2012 September 1, 2011           Other non-currentliabilities  1,675   1,923   2,171 Deficit  1,675   1,923   2,171    Accounting standards issued but notyet effectiveThe Company has not early adopted the following new standards and the impacts on the consolidated financial statements have not yet been determined, except as indicatedbelow:IFRS 9 - Financial InstrumentsIFRS 9 was issued in July 2014 and addresses classification andmeasurement of financial assets and replaces the multiple category and measurement models in IAS 39 – Financial Instruments – Recognition and Measurement for debt instruments with a new mixed measurement model having only two categories:amortized cost and fair value through profit or loss.  The new standard also addresses financial liabilities and they largely carry forward existing requirements in IAS 39, except that fair value changes to credit risk for liabilitiesdesignated at fair value through profit and loss would generally be recorded in other comprehensive income. In addition, the new standard introduces a new hedge accounting model more closely aligned with risk management activities undertaken byentities.This standard is required to be applied for annual periods beginning on or after January 1, 2018, with earlier adoption permitted.IFRS 15 – Revenue from Contracts with CustomersIFRS 15 – Revenue from Contracts with Customers was issued in May2014 and is a new standard that specifies the steps and timing for entities to recognize revenue as well as requiring them to provide more informative, relevant disclosures. IFRS 15 replaces IAS 11 - Construction Contracts and IAS 18 - Revenue, aswell as various IFRIC and SIC interpretations regarding revenue. The standard is required to be applied for annual periods beginning on or after January 1, 2017, with earlier adoption permitted.IFRIC 21 – LeviesIFRIC 21 – Levies clarifies the timing for the accounting of aliability that is imposed by governments should be based on the activity in the legislation that triggers the payment.  This standard is required to be applied retrospectively for annual periods beginning on or after January 1, 2014, withearlier adoption permitted.  The adoption of this standard is not expected to have an impact on the consolidated financial statements.   23  3.    OPERATING INCOME BEFOREDEPRECIATION, AMORTIZATION, IMPAIRMENT AND RESTRUCTURINGThe Company presents operating income before depreciation, amortization, impairment and restructuring, in the consolidated statement of operations, to assist users in assessingfinancial performance.  The Company’s management and Board use this measure to evaluate consolidated operating results and to assess the ability of the Company to incur and service debt.  In addition, this measure is usedto make operating decisions as it is an indicator of how much cash is being generated by the Company and assists in determining the need for additional cost reductions, evaluation of personnel and resource allocation decisions.  Operatingincome before depreciation, amortization, impairment and restructuring is referred to as an additional IFRS measure and may not be comparable to similar measures presented by other companies.4.    IMPAIRMENT TESTING OF GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETSThe Company’s impairments for the years ended August 31,2014, 2013 and 2012 consist of the following:             2014 2013 2012           Impairment testing of goodwill and indefinite lifeintangible assets Goodwill  -   73,900   - Intangible assets - mastheads(note 9)  -   15,100   - Intangible assets - domainnames (note 9)  -   1,300   - Property and equipment -machinery and equipment (note 8)  -   3,600   - Otherimpairments            Property and equipment - land and building (note 8)  -   6,083   - Impairments  -   99,983   -  During the year ended August 31, 2014, the Companycompleted its annual impairment testing for goodwill and indefinite life intangible assets (the “Annual Impairment Test”) as at May 31, 2014 (2013 – June 30, 2013) based on management's best estimates of market participantassumptions including weighted average cost of capital (“WACC”).  The recoverable amounts, determined based on fair value less costs of disposal, of the Goodwill CGU and individual CGUs, which are primarily individualnewspapers, were determined by utilizing a discounted cash flow approach using cash flow projections based upon financial forecasts prepared by management covering a three year period.  The future cash flows are based onmanagement’s best estimate using market participant assumptions considering historical and expected operating plans, current strategies, economic conditions, and the general outlook for the industry and markets in which the Goodwill CGU andindividual CGUs operate.  Cash flows beyond the three year period are extrapolated using estimated growth rates.   24   The after tax discount rate and terminal growth rate used by the Companyfor the purpose of the Annual Impairment Test for the Goodwill CGU and each of the individual CGUs was 13.2% and 0.0%, respectively (June 30, 2013 - 13.4% and 0.0%, respectively).  The after tax discount rate represents a WACC forcomparable companies operating in the Company’s industry, based on publicly available information.  The WACC is a market participant estimate of the overall required rate of return on an investment for both debt and equity owners andserves as the basis for developing an appropriate discount rate.  Determination of the WACC requires separate analysis of the cost of equity and debt, and considers a market participant risk premium based on an assessment of risks relatedto the projected cash flows of the Company’s CGUs.  The terminal growth rate does not exceed the long-term terminal growth rate for the business in which the Company’s CGUs operate. Based on the Annual Impairment Test theCompany concluded there was no impairment of the Goodwill CGU and the reasonable range of recoverable amounts for the Goodwill CGU, based on the high end of the range, was greater than its carrying value by an excess of $67.6 million (or9.8%).  For the Goodwill CGU, a 0.5% increase in the discount rate and 0.5% reduction in the terminal growth rate, assuming a constant cash flow margin, would result in the carrying amount exceeding the reasonable range for the recoverableamount.  In addition, based on the Annual Impairment Test, the Company concluded there were no impairments of its individual CGU’s and the reasonable range of recoverable amounts for the individual CGUs, based on the high end of therange, were greater than their carrying values.  However, for two CGUs, if the discount rate were to increase by 0.5% or if the terminal growth rate declined by 0.5%, assuming a constant cash flow margin, the carrying amount of the CGUswould exceed the reasonable range for the recoverable amount. For all other CGUs, no reasonably possible change in assumption would cause the recoverable amount to fall below the carrying value.The Companyconsidered the reasonability of the fair value less costs of disposal results, calculated using the discounted cash flow approach, by comparing them to transaction multiples with other companies in the industry and found the results under thediscounted cash flow approach to be reasonable.  Management has developed certain cost saving initiatives which have been incorporated in the financial forecasts noted above.  If these initiatives are not successful theforecasted operating cash flows may be reduced which may result in an impairment and such impairment, if any, may be material.As a result of lower than anticipated long-term revenue projections dueto economic and structural factors including the uncertainty of the print advertising market and the rapidly evolving digital advertising market the Company performed an interim impairment analysis as at May 31, 2013 (the “2013 InterimImpairment Analysis”), which utilized the same market participant assumptions as those disclosed for the 2013 Annual Impairment Test, and concluded certain of its assets were impaired.  Based on the 2013 Interim Impairment Analysisthe Company concluded the carrying value of the Goodwill CGU was less than its recoverable amount and recorded an impairment charge relating to its goodwill of $73.9 million for the year ended August 31, 2013.  Based on the 2013 AnnualImpairment Test, the Company concluded there was no additional impairment of the Goodwill CGU and the reasonable range of recoverable amounts for the Goodwill CGU, based on the high end of the range, was greater than its carrying value by an excessof $41.2 million (or 5.7%).  In addition, as a result of both the 2013 Interim Impairment Analysis and the 2013 Annual Impairment Test, the Company concluded the carrying value of two of its individual CGU’s were less than theirrecoverable amounts.  Accordingly, the Company has recorded an impairment charge of $20.0 million (note 9) pertaining to certain indefinite life intangible assets and property and equipmentof the two individual CGU’s for the year ended August 31, 2013.  There were no tax impacts as a result of the impairment charges.   25  5.    (GAIN) LOSS ON DERIVATIVE FINANCIAL INSTRUMENTSThe Company’s (gain) loss on derivative financial instruments forthe years ended August 31, 2014, 2013 and 2012 consists of the following:             2014 2013 2012           Gain on fair value swap notdesignated as a hedge (notes 12 and 18)  -   -   (13,396)Realized loss on settlement ofcash flow swaps designated as hedges (1)  -   -   2,740 Realized loss on settlement offair value swap not designated as a hedge (2)  -   -   8,843 Contractual cash interestsettlement on fair value swap not designated as a hedge (3)  -   -   2,806 (Gain) loss on embedded derivatives (notes 12 and 18)  (1,590)  7,306   (9,625)(Gain) loss on derivative financial instruments  (1,590)  7,306   (8,632) (1) OnJanuary 20, 2012 and August 16, 2012, foreign currency interest rate swaps designated as cash flow hedges with notional amounts of outstanding of US$10.0 million and US$40.8 million were settled for cash consideration of $0.7 million and $0.6million, respectively, resulting in a loss of $0.7 million and $1.2 million, respectively. In addition, on August 16, 2012, the Company paid $0.8 million related to the amendment of the foreign currency interest rate swap designated as a cash flowhedge (note 12).  (2)On August 16, 2012, the foreign currency interest rate swap not designated as a hedge with a notional amount of US$139.5 million was settled for cash consideration of $8.8 million(note 12). (3) During the years endedAugust 31, 2012, the Company made quarterly contractual interest settlements of $2.8 million on the foreign currency interest rate swap not designated as a hedge until it was settled on August 16, 2012. During the years ended August 31, 2014, 2013 and 2012, noineffectiveness was recognized in the consolidated statements of operations related to the Company’s cash flow hedges.  6.    DERIVATIVE FINANCIAL INSTRUMENTS          As at August 31, 2014 As at August 31, 2013        Assets      Embedded derivatives (notes 12and 18)  18,392   16,802 Foreign currency interest rate swap - designated as a cash flow hedge (1) (notes 12 and18)  -   1,411     18,392   18,213 Portion receivable within one year  -   (1,411)Non-current derivative financial instruments  18,392   16,802   (1) The foreign currency interest rateswap designated as a cash flow hedge matured on July 15, 2014 (note 12). The notional principal amount outstanding on the foreign currency interest rate swap designated as a cash flow hedge as at August 31, 2013 was US$167.5million.  During the year ended August 31, 2014, foreign currency exchange gains of $2.9 million (2013 – $11.3 million) (2012 –$3.2 million), were reclassified to the consolidated statements of operations from accumulated othercomprehensive loss, representing foreign currency exchange gains on the notional amount of the cash flow hedging derivatives.  These amounts were offset by foreign currency exchange losses recognized on the US dollar denominated 12.50%Senior Secured Notes due 2018 (“Second-Lien Notes”) for the years ended August 31, 2014, 2013 and 2012 and for the year ended August 31, 2012, the hedged portion of the Senior Secured Term Loan Credit Facility (“Term LoanFacility”).  During the year ended August 31, 2014, losses of $4.8 million (2013 - $6.9 million) (2012 - $8.1 million), were reclassified from accumulated other comprehensive loss to interest expense in the consolidated statements ofoperations related to the effect of the derivative financial instruments on the Company’s interest expense.   26   7.    INVENTORY          As at August 31, 2014 As at August 31, 2013        Newsprint  1,748   2,302 Other  546   932 Total inventory  2,294   3,234  No inventories were carried at net realizable value at August 31, 2014and 2013.8.    PROPERTY AND EQUIPMENT                   Land (3) Buildings and leaseholds (3) Computer hardware Machinery and equipment TotalCost               August 31, 2012  52,989   116,552   16,637   137,739   323,917 Additions  -   3,527   1,962   2,077   7,566 Disposals  (500)  (2,383)  (173)  (517)  (3,573)Transfer - asset held for sale (1)  (4,869)  (14,432)  -   -   (19,301)August 31, 2013  47,620   103,264   18,426   139,299   308,609 Additions  -   2,940   4,093   3,212   10,245 Disposals  -   (11)  (2,099)  (6,394)  (8,504)Transfer - asset held for sale (2)  (5,560)  (6,440)  -   (24,000)  (36,000)August 31, 2014  42,060   99,753   20,420   112,117   274,350                       Accumulated depeciation and accumulated impairment losses             August 31, 2012  -   (16,881)  (9,142)  (30,403)  (56,426)Depreciation  -   (8,013)  (3,111)  (18,825)  (29,949)Disposals  -   1,683   172   406   2,261 Impairments (note 4) (1)  (1,459)  (4,624)  -   (3,600)  (9,683)Transfer - asset held for sale (1)  1,459   6,902   -   -   8,361 August 31, 2013  -   (20,933)  (12,081)  (52,422)  (85,436)Depreciation  -   (8,083)  (2,738)  (55,825)  (66,646)Disposals  -   11   2,098   6,346   8,455 Transfer - asset held for sale (2)  -   634   -   23,650   24,284 August 31, 2014  -   (28,371)  (12,721)  (78,251)  (119,343)                      Net carrying value                    August 31, 2013  47,620   82,331   6,345   86,877   223,173 August 31, 2014  42,060   71,382   7,699   33,866   155,007   (1) During the year ended August 31, 2013 the Company recorded an impairment loss of $6.1 million with respect to the Edmonton Journal production facility upon reclassificationof the facility from property and equipment to asset held-for-sale.  The production facility is no longer required due to the outsourcing of the production of the Edmonton Journal and the Company has engaged a third party to market it forsale.  As at August 31, 2014 and 2013 the production facility has an estimated fair value less costs of disposal of $10.5 million and is recorded in the consolidated statement of financial position as an asset held-for-sale.  Inaddition, as a result of the Company’s annual impairment testing the Company recorded an impairment loss of $3.6 million related to machinery and equipment during the year ended August 31, 2013 (note 4).(2) During the year ended August 31,2014, due to the outsourcing of the production of the Montreal Gazette, the production facility and equipment are no longer required, and as a result the Company classified the facility and equipment as held-for-sale in the consolidated statement offinancial position.  As at August 31, 2014 the production facility and equipment have a carrying amount of $11.7 million which is lower than the fair value less costs of disposal.  Subsequent to August 31, 2014, all conditionswere waived related to an agreement to sell the Montreal Gazette production facility and equipment for gross proceeds of $12.5 million.  The sale is expected to close on October 31, 2014 and the net proceeds will be used to reduce theamount of the Rights Offering as described in note 24.(3) On July 29, 2014, all conditions werewaived related to an agreement to sell the Company’s Vancouver production facility's land and building for gross proceeds of $17.5 million.  The Company committed to third party outsourcing contracts for the production of theVancouver newspapers in November 2013 which will commence in February 2015.  The sale of the production facility is expected to close on June 30, 2015 and the net proceeds will be used to make an offer to redeem an equal amount ofFirst-Lien Notes at par in accordance with the terms and conditions of the First-Lien Notes indenture.   27   9.    INTANGIBLEASSETS                           Finite Life Indefinite Life      Software Subscribers Customer relationships Domain names Mastheads Domain names TotalCost                     August 31, 2012  48,618   145,700   11,834   7,591   229,100   27,447   470,290 Additions                            Internally developed  48   -   -   -   -   -   48 Purchased  5,884   -   -   -   -   -   5,884 Disposals  (73)  -   -   (644)  -   -   (717)August 31, 2013  54,477   145,700   11,834   6,947   229,100   27,447   475,505 Additions                            Purchased  3,109   -   -   -   -   -   3,109 Disposals  (819)  -   -   -   -   -   (819)August 31, 2014  56,767   145,700   11,834   6,947   229,100   27,447   477,795                               Accumulated amortization and accumulated impairment losses                     August 31, 2012  (23,712)  (62,316)  (5,362)  (1,038)  -   -   (92,428)Amortization  (10,648)  (29,140)  (2,420)  (1,117)  -   -   (43,325)Impairments (note 4)  -   -   -   -   (15,100)  (1,300)  (16,400)Disposals  69   -   -   339   -   -   408 August 31, 2013  (34,291)  (91,456)  (7,782)  (1,816)  (15,100)  (1,300)  (151,745)Amortization  (7,199)  (29,097)  (2,351)  (432)  -   -   (39,080)Disposals  819   -   -   -   -   -   819 August 31, 2014  (40,671)  (120,553)  (10,133)  (2,248)  (15,100)  (1,300)  (190,006)                              Net carrying value                            August 31, 2013  20,186   54,244   4,052   5,131   214,000   26,147   323,760 August 31, 2014  16,096   25,147   1,701   4,699   214,000   26,147   287,789    28   10.  ACCOUNTSPAYABLE AND ACCRUED LIABILITIES          As at August 31, 2014 As at August 31, 2013        Trade accountspayable  8,059   10,332 Accruedliabilities  40,800   46,281 Accrued interest on long-term debt  10,214   11,005 Accounts payable and accrued liabilities  59,073   67,618  11.  PROVISIONS              Restructuring (a) Other provisions (b) TotalProvisions as at August 31,2013  25,680   1,243   26,923 Net charges(recoveries)  37,581   (298)  37,283 Payments  (47,822)  (121)  (47,943)Provisions as at August 31,2014  15,439   824   16,263 Portion due within one year  (15,439)  (190)  (15,629)Non-current provisions  -   634   634  (a) Restructuring During the year endedAugust 31, 2012, the Company began implementing a three year business transformation program aimed at significantly reducing legacy newspaper infrastructure costs.  The restructuring expense consists of a series of involuntary andvoluntary buyouts and includes initiatives such as the outsourcing of the Company’s production at certain newspapers.  During the year ended August 31, 2014, the Company made a payment of $17.5 million in trust to fund therestructuring payments related to certain planned production outsourcing and has accounted for this trust as an other long-term employee benefit plan (note 13). (b) Other provisions Other provisions include unfavorable lease contracts, equipment removal costs, as well as provisions for certain claims and grievances which have been asserted against theCompany.   29   12.   LONG-TERM DEBT                         As at August 31, 2014 As at August 31, 2013  MaturityPrincipal Financing fees, discounts and other Carrying value of debt Carrying value of debt8.25%Senior Secured Notes (1)August 2017  205,460   4,447   201,013   212,033 12.5%Senior Secured Notes (US$268.6M) (2) (*)July 2018  292,087   6,800   285,287   274,847 Senior Secured Asset-Based Revolving Credit Facility (3)July 2014  N/A   N/A   N/A   - Total long-termdebt            486,300   486,880 Portion due within one year            (12,500)  (12,500)Non-current long-term debt            473,800   474,380                     (*) - US$ principal translated to the Canadian equivalentbased on the foreign exchange rate on August 31, 2014 of US$1:$1.0873 (August 31, 2013 - US$1:$1.0530).  (1) 8.25% Senior Secured Notes due 2017 (“First-Lien Notes”)As at August31, 2014, Postmedia Network has $205.5 million of First-Lien Notes outstanding (August 31, 2013 - $218.0 million).  The effective interest rate of the First-Lien Notes which amortizes the initial financing fees and embedded derivativebased on the initial estimated future cash flows is 9.4%.  The First-Lien Notes are secured on a first priority basis by substantially all of the assets of Postmedia Network and the assets of the Company (“First-Lien NotesCollateral”), with the exception of those assets that comprised the ABL Collateral (defined below) and, on a second-priority basis by the ABL Collateral”).  The First-Lien Notes are subject to minimum annual principalredemptions equal to 5% of the original principal amount of $250.0 million.  The annual principal redemptions are payable in semi-annual instalments of $6.25 million on April 30 and October 31 of each year, with the exception of the firstinstalment of $8.9 million which was paid on April 30, 2013.  Interest will accrue from the date of issuance and is payable semi-annually in arrears on April 30 and October 31 of each year, with the exception of the first instalment whichwas paid on April 30, 2013.  On November 12, 2012, the Company redeemed $23.2 million aggregate principal amount of First-Lien Notes at par in accordance with the terms and conditions of the First-Lien Notes indenture with the net proceedsfrom the disposition of the land and building located at 1450 Don Mills Road in Don Mills, Ontario.  After February 28, 2013, and for each subsequent quarter ending February and August, if the consolidated First-Lien Notes leverage ratioexceeds 2:1, the Company is obligated to make a mandatory First-Lien Notes excess cash flow offer, calculated based on 50% of the Company’s excess cash flow, to redeem a portion of the First-Lien Notes. During the years ended August 31, 2014and 2013, the consolidated First-Lien Notes leverage ratio did not exceed 2:1, and as a result the Company made no excess cash flow offer.   30  Other than as described above, the Company is not required to make anyother mandatory payments or offers with respect to the First-Lien Notes.  The Company may, at its option, redeem all or part of the First-Lien Notes at any time prior to August 16, 2015 at a make whole price, and at a premium of 6.188% forthe twelve month period beginning on August 16, 2015, and a premium of 4.125% for the twelve month period beginning on August 16, 2016.  Additionally, under certain circumstances the Company may redeem up to 35% of the aggregate principalamount of the First-Lien Notes at a premium equal to 8.25%.  Certain of the prepayment options represent an embedded derivative that is accounted for separately at fair value.  As at August 31, 2014, the embedded derivative assethas a fair value of $3.6 million (August 31, 2013 - $0.6 million), which is recorded on the consolidated statement of financial position as a non-current asset in derivative financial instruments (note 6).  During the year ended August 31,2014 the Company recorded a gain of $3.0 million (2013 – loss of $0.2 million) (2012 – $0.1 million) in (gain) loss on derivative instruments in the consolidated statement of operations related to this embedded derivative (note5).Prior to August 16, 2015, the Company has the right to redeem up to 5%annually of the original principal amount of the First-Lien Notes at a premium of 3% (the “Special Call Right”), provided that the total cumulative redemption is no greater than 15% of the original principal amount of the First-LienNotes.The First-Lien Notes are also subject to covenants that restrict the Company’s ability to incur additional indebtedness, pay dividends or make other distributions orrepurchase or redeem certain indebtedness or capital stock, make loans and investments, sell assets, incur certain liens, enter into certain transactions with affiliates, alter the businesses it conducts, enter into agreements restricting itssubsidiaries’ ability to pay dividends and consolidate, merge or sell all or substantially all of its assets.Senior SecuredTerm Loan Credit Facility (“Term Loan Facility”)On August 16, 2012, the Term Loan Facility was repaid in full in the amount of US$240.0 million (CDN$238.3 million), funded from the proceeds of the First-LienNotes.  As a result during the year ended August 31, 2012, the Company charged a total of $9.2 million to the consolidated statement of operations as a loss on debt repayment which represents unamortized discounts and financing feesrelated to the Term Loan Facility.On August 16, 2012, in conjunction with the repayment of the Term Loan Facility, the Company paid $8.8 million to settle the amortizing foreign currency interest rate swap whichhedged the principal payments on a notional amount of US$139.5 million, at a fixed currency exchange rate of US$1:$1.035 until July 2014 and converted the interest rate on the notional Canadian principal amount to bankers acceptance rates plus7.07%.  As a result of this settlement, during the year ended August 31, 2012, the Company recorded a loss of $8.8 million which was recorded in gain (loss) on derivative financial instruments in the consolidated statement of operations(note 5).  The Company had not designated this swap as a hedge and as a result changes in fair value were recognized in (gain) loss on derivative financial instruments in the consolidated statement of operations (note 5).   31  On August 16, 2012, in conjunction with the repayment of the Term LoanFacility, the Company paid $0.6 million to settle the amortizing foreign currency interest rate swap which hedged the principal payments on a notional amount of US$40.8 million, at a fixed currency exchange rate of US$1:$0.9845 and a fixed interestrate of 8.66% until May 2015.  As a result of this settlement, during the year ended August 31, 2012, the Company reclassified a loss of $1.2 million from accumulated other comprehensive loss to gain (loss) on derivative financialinstruments in the consolidated statement of operations (note 5).  The Company had designated this hedging arrangement as a cash flow hedge.In accordance with the terms and conditions of the Term Loan Facility,on November 30, 2011 the proceeds from the sale of substantially all of the assets and liabilities of the Lower Mainland Publishing Group, the Victoria Times Colonist and the Vancouver Island Newspaper Group (the “Disposed Properties”)were used to make a principal payment of US$84.6 million (CDN$86.5 million).  The Company accounted for the Term Loan Facility at amortized cost using the effective interest rate method and as a result of this repayment the Companyrecalculated the carrying amount of the Term Loan Facility as at November 30, 2011 to reflect the actual and revised estimates of expected future cash flows.  As a result of such recalculation during the year ended August 31, 2012, theCompany charged a total of $6.9 million to interest expense in the consolidated statement of operations representing an acceleration of unamortized financing fees and discounts of the Term Loan Facility.  Of this amount, $6.4 million wasallocated to interest expense of discontinued operations as this portion related to the repayment due to the sale of the Disposed Properties (note 23).(2) 12.50% Senior Secured Notes due 2018 (“Second-Lien Notes”)As at August31, 2014, Postmedia Network has US$268.6 million (CDN$292.1 million) of Second-Lien Notes outstanding (August 31, 2013 - US$268.6 million (CDN$282.9 million)).  The effective interest rate of the Second-Lien Notes which amortizes theinitial financing fees, discounts and other based on the initial estimated future cash flows is 13.3%.  The Second-Lien Notes are secured on a second priority basis by the First-Lien Notes Collateral.  There were no redemptionsof Second-Lien Notes during the year ended August 31, 2014 and 2013.  During the year ended August 31, 2012, the Company repurchased and retired US$6.4 million of the Second-Lien Notes for total cash consideration of $6.3 million (US$6.2million) and as such the Company recorded a gain of $0.1 million which is recorded in interest expense in the consolidated statement of operations.The Second-Lien Notes have a variable prepayment option subject to apremium of 6.25% for the period July 15, 2014 to July 14, 2015, 3.125% for the period July 15, 2015 to July 14, 2016 and nil thereafter.  Additionally, under certain conditions the Company can redeem up to 35% of the original principalamount of the Second-Lien Notes prior to July 15, 2014 for a premium of 12.5% or the Company can redeem the Second-Lien Notes upon the payment of a customary make-whole premium.  Certain of the prepayment options represent an embeddedderivative that is accounted for separately at fair value.  As at August 31, 2014, the embedded derivative asset has a fair value of $14.8 million (August 31, 2013 - $16.2 million) which is recorded on the consolidated statement offinancial position as a non-current asset in derivative financial instruments (note 6).  During the year ended August 31, 2014 the Company recorded a loss of $1.4 million (2013 – $7.1 million) (2012 – gain of $9.5 million) in(gain) loss on derivative financial instruments in the consolidated statement of operations related to this embedded derivative (note 5).   32  The Company had a foreign currency interest rate swap with a notionalamount of US$167.5 million outstanding at August 31, 2013.  The foreign currency interest rate swap had a fixed currency exchange rate of US$1:$1.035, a fixed interest rate of 14.78% and matured on July 15, 2014.  On July 15,2014, the Company net settled the notional amount of US$167.5 million of the foreign currency interest rate swap and received cash consideration of $6.1 million related to the final exchange of principal. The Company designated this hedgingarrangement as a cash flow hedge and its fair value as at August 31, 2013, an asset of $1.4 million, was recorded in the consolidated statement of financial position in current portion of derivative financial instruments (note 6).  Thiscash flow hedge was 100% effective at July 15, 2014.  On August 16, 2012, the issuance of the First-Lien Notes and the repayment of the Term Loan Facility gave rise to a potential termination event under the foreign currency interest rateswap agreement (the “Swap Agreement”).  As a result, the Company entered into negotiations to amend the terms of the existing Swap Agreement.  During August 2012, the Company amended the Swap Agreement on a notionalamount of US$167.5 million for cash consideration of $0.8 million and charged it to the consolidated statement of operations in (gain) loss on derivative financial instruments (note 5) and during September, 2012, the Company settled a notionalamount of US$97.5 million of this foreign currency interest rate swap for cash consideration of $9.6 million, including $0.6 million of accrued interest.  In addition, during the year ended August 31, 2012, in conjunction with theretirement of US$6.2 million of the Second-Lien Notes, the Company settled a notional amount of US$10.0 million of the foreign currency interest rate swap associated with the Second-Lien Notes for cash consideration of $0.7 million.  As aresult of this settlement, during the year ended August 31, 2012 the Company reclassified a loss of $0.7 million from accumulated other comprehensive income to gain (loss) on derivative financial instruments in the consolidated statement ofoperations (note 5).The Second-Lien Notes are subject to covenants that restrict the Company’s ability to incur additional indebtedness, pay dividends or make other distributions or repurchaseor redeem certain indebtedness or capital stock, make loans and investments, sell assets, incur certain liens, enter into certain transactions with affiliates, alter the businesses it conducts, enter into agreements restricting itssubsidiaries’ ability to pay dividends and consolidate, merge or sell all or substantially all of its assets.(3) Senior secured asset-based revolving credit facilityThe Companyhad a revolving senior secured asset-based revolving credit facility for an aggregate amount of up to $60 million, including a $10 million letter of credit sub-facility, (the “ABL Facility”) that matured on July 13, 2014.  TheABL Facility was secured on a first-priority basis by accounts receivable, cash and inventory of Postmedia Network and any related assets of the Company (the “ABL Collateral”) and on a third priority basis by the First-Lien NotesCollateral.  The ABL Facility calculated interest at either bankers acceptance rates plus 3.75% (reduced to 3.50% when the average availability under the ABL Facility is greater than $30 million) or Canadian prime plus 2.75% (reduced to 2.50% when the average availability under the ABL Facility is greater than $30 million). The proceeds of the loans under the ABL Facility were permitted to be used to finance theworking capital needs and general corporate purposes of the Company.  There were limitations on the Company’s ability to incur the full $60 million of commitments under the ABL Facility. Availability was limited to the lesser of aborrowing base and $60 million, less an excess availability amount of $15 million.  As a result, the maximum availability under the ABL Facility was no greater than $45 million.   33  On October 16, 2014 the Company entered into a new senior securedasset-based revolving credit facility (the “New ABL Facility”) for an aggregate amount of up to $20.0 million. The New ABL Facility will replace the Company’s ABL Facility that matured on July 13, 2014. The New ABL Facility willmature one year from the closing date and will be secured on a first-priority basis by accounts receivable, cash and inventory of Postmedia Network and any related assets of the Company and on a third priority basis by the First-Lien Notescollateral (note 24).As at August 31, 2013, the Company had no amounts drawn on the ABL Facility and had availability of $20.7 million.  Included in other assets on the consolidatedstatement of financial position as at August 31, 2013 were financing fees of $0.7 million with respect to the ABL Facility.  Amortization expense in respect of the financing fees for the year ended August 31, 2014 was $0.7 million (2013and 2012 - $0.8 million) and is recorded in interest expense in the consolidated statement of operations.Principal undiscounted minimum payments of long-term debt, based uponterms and conditions existing at August 31, 2014 are as follows:      2015  12,500 2016  12,500 2017  180,460 2018  292,087 Thereafter  -     497,547  Aggregate interest expense relating to long-term debt for the year ended August 31, 2014 was $61.5 million (2013 - $61.2 million) (2012 - $72.6 million, which included interestexpense allocated to discontinued operations of $8.1 million, note 23). 13.   EMPLOYEE BENEFITPLANS The Company has a number of funded and unfunded defined benefit plans that include pension benefits, post-retirement benefits,and other long-term employee benefits as well as a defined contribution pension benefit plan.  The defined benefit pension plans are registered under the Ontario Pension Benefits Act, 1987 and provide benefits upon retirement, terminationor death based upon years of service and final average salary.  The post-retirement benefit plans are non-contributory and include health and life insurance benefits available to eligible retired employees.  The other long-termbenefit plans are non-contributory and include disability, health and life insurance benefits available to eligible active employees.  The Company pays contributions to the defined contribution pension benefit plan which provides benefitsupon retirement to eligible employees.  34  The net defined benefit plan obligation related to the Company’s pension benefit plans, post-retirement benefit plans and other long-term employeebenefit plans recorded in other non-current liabilities on the consolidated financial position as at August 31, 2014 and 2013 are as follows:          As at August 31, 2014 As at August 31, 2013        Pension benefits  52,978   44,066 Post-retirementbenefits  64,609   55,691 Other long-term employee benefits  21,960   20,632 Net defined benefit plan obligation  139,547   120,389  Changes to the Company’s pension benefit plans, post-retirement benefit plans and other long-term employee benefit plans benefit obligations and thefair value of plan assets for the year ended August 31, 2014 and 2013 are as follows:                        Pension benefits Post-retirement benefits Other long-term employee benefits   2014 2013 2014 2013 2014 2013     (revised - note 2)    (revised - note 2)      Change in benefit obligations             Benefit obligations, beginningof year  433,126   447,215   55,691   61,475   20,632   17,207 Current servicecost  10,704   12,095   1,215   1,790   3,020   2,328 Interest cost  20,661   19,849   2,595   2,669   852   600 Employeecontributions  3,625   4,268   -   -   -   - Actuarial losses(gains)  68,502   (30,706)  7,325   (7,765)  (101)  2,658 Benefits paid  (40,706)  (19,595)  (2,217)  (2,478)  (2,443)  (2,161)Settlement funds in trust (1)  -   -   -   -   17,500   - Benefit obligations, end of year  495,912   433,126   64,609   55,691   39,460   20,632                           Change in fair value of plan assets             Fair value of plan assets,beginning of year  389,060   355,972   -   -   -   - Expected return on plan assets(2)  18,491   15,660   -   -   -   - Actuarial gains  55,135   21,110   -   -   -   - Employercontributions  18,217   12,368   2,217   2,478   2,443   2,161 Employeecontributions  3,625   4,268   -   -   -   - Benefits paid  (40,706)  (19,595)  (2,217)  (2,478)  (2,443)  (2,161)Administrationcosts  (888)  (723)  -   -   -   - Settlement funds in trust (1)  -   -   -   -   17,500   - Fair value of plan assets, end of year  442,934   389,060   -   -   17,500   -                           Net defined benefit plan obligations             Benefitobligations  495,912   433,126   64,609   55,691   39,460   20,632 Fair value of plan assets  442,934   389,060   -   -   17,500   - Net defined benefit plan obligations (3)  52,978   44,066   64,609   55,691   21,960   20,632  (1) During the year ended August 31,2014, the Company made a payment in trust to fund the restructuring payments related to certain planned production outsourcing and has accounted for this trust as an other long-term employee benefit plan. (note11).(2) The actual return on plan assets for the year ended August 31, 2014 was $73.6 million (2013 - $36.8million). (3) As at August 31, 2014 and 2013, noneof the Company’s pension benefit plans were fully funded.   35   The investment strategy forpension plan assets is to utilize a balanced mix of equity and fixed income portfolios to earn a long-term investment return that meets the Company’s pension plan obligations.  Active management strategies and style diversificationstrategies are utilized for the equity portfolios in anticipation of realizing investment returns in excess of market indices.  The compensation and Pension Committee, composed of certain members of the Company’s Board, is appointedby the Board to oversee and monitor the management and overall governance of the pension and retirement plans sponsored and administered by the Company.  The compensation and pension committee, among other things, oversees the investmentstrategy for the pension plan assets, including adopting the Company’s investment policy and monitoring compliance with the policy, appoints the investment fund managers and reviews their performance. The utilization of investment fundmanagers who adopt different style mandates allows the Company to achieve a diversified portfolio and reduce portfolio risks.The Company's investment policy addresses the permitted and prohibitedinvestments for the plan assets including restrictions on the fixed income quality, and quantity of investments in various asset classes as follows: ●The fixed income quality restrictionsinclude a minimum rating of “BBB” from the Dominion Bond Rating Services or equivalent for bonds and debentures; a minimum rating of “R-1” from the Dominion Bond Rating Services or equivalent for short-term investments; and aminimum rating of “P-1” or equivalent for preferred stock.●The quantity of investments allowed invarious asset classes ranges from 5% to 45% and contains restrictions such that no single equity holding shall exceed 10% of the book value of plan assets, no single equity holding shall exceed 15% of the market value of an investment managersequity portfolio, no single equity holding will exceed 30% of the voting shares of any such corporation, no more than 10% of any investment managers bond portfolio may be invested in bonds of any such company other than bonds of the federalgovernment or bonds of any such provincial government with a minimum rating of AA and no more than 15% of the market value of any investment managers bond portfolio may be invested in bonds with a rating of BBB or equivalent.●Investment managers are prohibited frommaking direct investments in resource properties, mortgages, venture capital financing, bonds of foreign issuers, investing in companies for the purposes of managing them, purchasing securities on margin or making short sales.●The pension plans are not permitted todirectly invest in debt or equity securities of the Company. The pension benefit plans of the Company have an asset mix as at August31, 2014 and 2013, as follows:              As at August 31, 2014 As at August 31, 2013 TargetFair value hierarchy             Canadian equities  31%  33%  30%Level 2Foreign equities  30%  32%  30%Level 2Fixed income  39%  35%  40%Level 2Cash  0%  0%  0%Level 1  36   The net employee benefit plan costs related to the Company’spension benefit plans, post-retirement benefit plans and other long-term employee benefit plans reported in net loss from continuing operations in the consolidated statements of operations for the years ended August 31, 2014, 2013 and 2012 are asfollows:                                         Pension benefits Post-retirement benefits Other long-term employee benefits Total   2014 2013 2012 2014 2013 2012 2014 2013 2012 2014 2013 2012                                      Current servicecost  10,704   12,095   10,101   1,215   1,790   1,752   3,020   2,328   2,311   14,939   16,213   14,164 Administrationcosts  888   723   723   -   -       -   -   -   888   723   723 Net actuarial losses(gains)  -   -   -   -   -   -   (101)  2,658   (582)  (101)  2,658   (582)Net financingexpense  2,170   4,189   1,960   2,595   2,669   3,041   852   600   705   5,617   7,458   5,706 Curtailment gains (1)  -   -   (4,108)  -   -   -   -   -   -   -   -   (4,108)Net defined benefit planexpense (2)  13,762   17,007   8,676   3,810   4,459   4,793   3,771   5,586   2,434   21,343   27,052   15,903 Employer contributions to   defined contribution plans  3,715   3,833   4,412   -   -   -   -   -   -   3,715   3,833   4,412 Total plan expense  17,477   20,840   13,088   3,810   4,459   4,793   3,771   5,586   2,434   25,058   30,885   20,315  (1) During the year ended August 31,2012, the termination of employees under the restructuring initiatives resulted in the elimination, for a significant number of employees, of the right to earn defined benefits and as a result a curtailmentoccurred.(2) During the year ended August 31,2013, there was an arbitrator’s ruling against the Company that resulted in a change to benefits provided under an other long-term employee benefit plan.  As a result the Company recorded an expense for the year ended August 31, 2013of $2.3 million, consisting of actuarial losses of $1.8 million and cash costs of $0.5 million, which is included in restructuring and other items in the consolidated statement of operations.  All other current service costs,administration costs and net actuarial losses (gains) related to other long-term employee benefits are included in compensation expense in the consolidated statements of operations.  Net financing expense is included in net financingexpense relating to employee benefit plans in the consolidated statements of operations. Actuarial gains and losses related to the Company’s pensionbenefit plans and post-retirement benefit plans recognized in the consolidated statements of comprehensive loss for the years ended August 31, 2014, 2013 and 2012 are as follows:                                Pension benefits Post-retirement benefits Total   2014 2013 2012 2014 2013 2012 2014 2013 2012                             Other comprehensive income (loss) from continuingoperations    Netactuarial gains (losses) on employee benefits  (13,367)  51,816   (70,228)  (7,325)  7,765   (3,812)  (20,692)  59,581   (74,040)Gainon minimum funding liability of employee benefits  -   -   4,146   -   -   -   -   -   4,146 Other comprehensive loss from discontinuedoperations             Net actuarial losses on employee benefits  -   -   (376)  -   -   -   -   -   (376)Net actuarial gains (losses) recognized in other comprehensive income (loss)  (13,367)  51,816   (66,458)  (7,325)  7,765   (3,812)  (20,692)  59,581   (70,270) The cumulative actuarial losses related to the Company’s pension benefit plans and post-retirement benefit plans recognized directly in deficit in the consolidatedstatement of financial position as at August 31, 2014 are as follows:       2014      Cumulative actuarial gainsrecognized directly in deficit as at August 31, 2013 (revised - note 2)  395 Net actuarial losses recognized in other comprehensive income (loss) and deficit  (20,692)Cumulative actuarial losses recognized directly in deficit as at August 31, 2014  (20,297)   37   Significant actuarial assumptions in measuring the Company’sbenefit obligations as at August 31, 2014 and 2013 and employee benefit plan expense for the years ended August 31, 2014, 2013 and 2012, are as follows:             Pension benefits Post-retirement benefits(1) Other long-term employee benefits                                2014 2013    2014 2013    2014 2013   Benefit obligations (2)                             Discount rate (3)  4.00%  4.70%     3.90%  4.65%     3.00%  3.80%     Rate of compensation increase  2.75%  2.75%     2.75%  2.75%     5.00%  5.00%                                                                             2014  2013  2012  2014  2013  2012  2014  2013  2012Benefitplan expense                                      Discount rate  4.70%  4.35%  5.45%  4.65%  4.30%  5.45%  3.80%  3.35%  4.50%  Rate of compensation increase  2.75%  2.75%  3.25%  2.75%  2.75%  3.25%  5.00%  2.75%  3.10% (1) The assumed health care cost trend rates for the next year used to measure the expected cost of benefits covered for the post-retirement benefit health and life planswere 7.75% for medical, to an ultimate rate of 4.5% over 13 years to 2027.(2) As at August 31, 2014, the duration of the pension,post-retirement and other long term employee benefit obligation was 15, 14 and 6 years, respectively (August 31, 2013 – 14 ,14 and 6, respectively).(3) A change in the discount rate used in the valuation of defined benefitobligations, affects the reported funded status of the Company’s plans as well as the net benefit cost in subsequent years.  As at August 31, 2014, a 50 basis-point decrease in the discount rate would increase the pension,post-retirement and other long-term employee benefit obligations by $37.9 million, $4.5 million and $0.7 million, respectively, and a 50 basis-point increase in the discount rate would decrease the pension, post-retirement and other long-termemployee defined benefit obligations by $33.8 million, $4.5 million and $0.7 million, respectively. The most recently filed actuarial funding valuations for all of thepension benefit plans were as of December 31, 2013 and indicated they had an aggregate going concern actuarial surplus of $24.6 million and a wind up deficiency (which assumes that the pension plans terminate on their actuarial valuation date) of$57.7 million.  The Company expects to contribute $15.2 million (including special payments of $8.4 million) to its defined benefit pension plans, $2.5 million to its post-retirement benefit plans and $2.5 million to its other long-termemployee benefit plans for the year ending August 31, 2015.  The Company’s next required actuarial funding valuations will be as at December 31, 2016 and must be complete by September 30, 2017.  38  14.   CAPITAL STOCKTheCompany’s shares trade on the Toronto Stock Exchange (“TSX”) under the symbols PNC.A for its Class C voting shares (“Voting Shares”) and PNC.B for its Class NC variable voting shares (“Variable VotingShares”).Authorized capital stockThe Company’s authorized capital stock consists of two classes;Voting Shares and Variable Voting Shares.  The Company is authorized to issue an unlimited number of Voting Shares and Variable Voting Shares.VotingSharesHolders of the Voting Shares shall be entitled to one vote at all meetings of shareholders of the Company.  The Voting Shares and Variable Voting Shares rank equally ona per share basis in respect of dividends and distributions of capital.A Voting Share shall be converted into one Variable Voting Share automatically if a Voting Share becomes held or beneficially owned or controlled, by a person who is a citizen orsubject of a country other than Canada. In addition to the automatic conversion feature, a holder of Voting Shares shall have the option at any time to convert some or all of such shares into Variable Voting Shares on a one-for-one basis and toconvert those shares back to Voting Shares on a one-for-one basis.Variable Voting SharesThe Variable Voting Shares have identical terms as the Voting Shares andrank equally with respect to voting, dividends and distribution of capital, except that Variable Voting Shares shall not carry one vote per Variable Voting Share if:(a) the number of issued and outstanding Variable Voting Shares exceeds 49.9% of the total number of all issued and outstanding shares; or (b) the total number ofvotes that may be cast by, or on behalf of, holders of Variable Voting Shares present at any meeting of holders of Shares exceeds 49.9% of the total number of votes that may be cast by all holders of Shares present and entitled to vote at suchmeeting. If either of the above-noted thresholds is surpassed at any time, the vote attached to each Variable Voting Share will decrease automatically to equal the maximum permitted voteper Variable Voting Share.   39  Postmedia Rights PlanUnder the Postmedia Rights Plan, one right has been issued by Postmediain respect of each Voting Share and Variable Voting Share. A right shall become exercisable upon a person, including any party related to it, acquiring or attempting to acquire beneficial ownership of 20% or more of the outstanding shares of a classwithout complying with the “Permitted Bid” provisions of the Postmedia Rights Plan. For purposes of determining beneficial ownership under the Postmedia Rights Plan, Variable Voting Shares beneficially owned or controlled by a person orsubject of Canada are deemed to also include the Voting Shares into which such Variable Voting Shares could be converted.  Should such an acquisition occur or be announced, subject to all other provisions of the Postmedia Rights Plan, eachright will entitle the holder to purchase from Postmedia additional shares at a 90% discount to the prevailing market price. This purchase could cause substantial dilution to the person or group of persons attempting to acquire control of Postmedia,other than by way of a Permitted Bid. The Board has discretion to waive the application of the Postmedia Rights Plan, and to amend the Postmedia Rights Plan at any time, or redeem the rights for $0.000001 per right. The Postmedia Rights Plan was reapproved at the Annual Shareholder meeting during 2014 and will remain in force until the earlier of the Termination Time (the time at which theright to exercise rights will terminate pursuant to the Postmedia Rights Plan) and the Annual Shareholder meeting of Postmedia three years thereafter unless at or prior to such meeting the shareholders ratify the continued existence of the PostmediaRights Plan.Issued and outstanding capital stock             Voting Shares Variable Voting Shares Total Shares   Number $ 000's Number $ 000's Number $ 000'sBalance asof August 31, 2012  1,302,730   12,002   39,020,440   359,130   40,323,170   371,132 Conversions  (227,698)  (2,108)  227,698   2,108   -   - Cancellations (1)  (92,971)  -   (20,580)  -   (113,551)  - Balance asof August 31, 2013  982,061   9,894   39,227,558   361,238   40,209,619   371,132 Conversions  (37,342)  (346)  37,342   346   -   - Balance as of August 31, 2014  944,719   9,548   39,264,900   361,584   40,209,619   371,132   (1) On December 7, 2012 the Company cancelled, for no consideration, 92,971 Voting Shares and 20,580 Variable Voting Shares that were held in trust by the court appointed monitor ofthe Canwest Limited Partnership Companies Creditors Arrangement Act filing. The following table provides a reconciliation of the denominators, whichare presented in whole numbers, used in computing basic and diluted earnings (loss) per share for the years ended August 31, 2014, 2013 and 2012. No reconciling items in the computation of net loss exist.              2014 2013 2012Basic weighted average sharesoutstanding during the period  40,209,619   40,239,796   40,323,170 Dilutive effect of options and RSUs  -   -   - Diluted weighted average shares outstanding during the period  40,209,619   40,239,796   40,323,170               Options and RSUs outstanding which are anti-dilutive  1,734,000   1,288,000   1,056,000   40   15.     SHARE-BASEDCOMPENSATION PLANS AND OTHER LONG-TERM INCENTIVE PLANSShare option planThe Company has a share option plan (the “Option Plan”) forits employees and officers to assist in attracting, retaining and motivating officers and employees.  The Option Plan is administered by the Board.The maximum number of options available for issuance under the OptionPlan is 3.0 million and shall not exceed 10% of the Company’s issued and outstanding shares. The issued options entitle the holder to acquire one share of the Company at an exercise price no less than the fair value of a share at the date ofgrant, of which fair value is determined to be the volume-weighted average trading price of the Voting Shares on the TSX for the five trading days immediately preceding the issuance of such options.  The issued options vest as follows: 20%immediately with the remainder vesting evenly over 4 years on the anniversary date of the date of grant.  Each option may be exercised during a period not exceeding 10 years from the date of grant.During theyear ended August 31, 2014, the Company granted 0.6 million options under the Option Plan (2013 – nil).  The fair value of the underlying options was estimated using the Black-Scholes option pricing model.  The fair valueof the issued options and key assumptions used in applying the Black-Scholes option pricing model were as follows:    2014Fair value $0.94       Key assumptions        ExercisePrice $2.02     Risk-freeinterest rate (1)  1.38%    Dividendyield  -     Volatilityfactor (2)  52.73%    Expected life of options (3) 5 years (1) Based on Bank of Canadafive year benchmark bond yield in effect on the date of grant.(2) Based in part on the volatility of the Company's shares and the volatility of similar companies in the publishingand media industries.     media industries.(3) Based on contractual terms and apublished academic study.    41   The following table provides details on the changes to the issuedoptions, which are presented in whole numbers, for the years ended August 31, 2014, 2013 and 2012:    2014 2013 2012   Options Weightedaverageexerciseprice Options Weightedaverageexerciseprice Options WeightedaverageexercisepriceBalance beginning ofyear  1,208,000  $8.69   1,480,000  $8.74   1,280,000  $9.85 Granted  560,000  $2.02   -  $-   600,000  $6.43 Forfeited  (32,000) $3.12   (128,000) $(8.57)  (184,000) $(9.40)Cancelled  (26,000) $5.41   (144,000) $(9.28)  (216,000) $(8.33)Balance end of year  1,710,000  $6.66   1,208,000  $8.69   1,480,000  $8.74                           Vested options at end of year - exercisable  1,134,000  $8.43   808,000  $9.14   696,000  $9.38  During the year ended August 31, 2014, the Company recorded compensationexpense relating to the Option Plan of $0.6 million (2013 - $0.5 million) (2012 - $1.2 million), with an offsetting credit to contributed surplus.Total unrecognized compensation expense is $0.3 million, which isexpected to be recognized over the next four years.Restricted share unit planThe Company has a restricted share unit plan (the “RSUPlan”).  The RSU Plan provides for the grant of restricted share units (“RSUs”) to participants, being current, part-time or full-time officers, employees or consultants of the Company.  The maximum aggregatenumber of RSUs issuable pursuant to the RSU Plan outstanding at any time shall not exceed 0.6 million Voting Shares or Variable Voting Shares (“Shares”) of the Company. The RSU Plan is administered by the Board.Each RSU willbe settled for one Share, without payment of additional consideration, after such RSU has vested; however, at any time, a participant may request in writing, upon exercising vested RSUs, subject to the consent of the Company, that the Company pay anamount in cash equal to the aggregate current fair market value of the Shares on the date of such exercise in consideration for the surrender by the participant to the Company of the rights to receive Shares under such RSUs.  The Board mayin its sole discretion accelerate the vesting date for all or any RSUs for any participant at any time and from time to time.  RSUs are non-transferable. The terms and conditions of RSUs granted under the RSU Plan will be subject toadjustments in certain circumstances, at the discretion of the Board and contain certain conditions regarding the resignation, cessation and termination of participants.    42    The Company has granted a tandem award that provides a choice to eitherexercise 0.6 million stock options or 0.6 million RSU’s. Of the tandem award, 0.1 million vested immediately on the date of the grant with the remaining 0.5 million vesting evenly over a four year period on the anniversary date of the date ofgrant.  As at August 31, 2014, 0.6 million RSU’s had vested (August 31, 2013 – 0.5 million).  The fair value of the tandem award was estimated by using a grant date fair value per share of $9.26.  The fairvalue of $9.26 per share was based on the per share proceeds received on the initial capitalization of the Company.  The Company granted no RSU’s during the years ended August 31, 2014, 2013 and 2012.  During the year endedAugust 31, 2014, the Company recorded compensation expense relating to the tandem award of $0.3 million (2013 - $0.6 million) (2012 - $1.1 million), with an offsetting credit to contributed surplus.Deferred share unit planThe Company has a deferred share unit plan (the “DSU Plan”)for the benefit of its non-employee directors.  The DSU Plan is administered by the Board.Under the DSU Plan, non-employee directors of the Company are requiredto elect to receive at least 50% (and may irrevocably elect to receive up to 100%) of their annual fees satisfied in the form of  deferred share units (“DSUs”), and may receive additional grants of DSUs under the DSUPlan.  The number of DSUs to be credited to a director will be calculated, on the date that fees are payable to such director, by dividing the dollar amount elected by such director in respect of such fees by the value of ashare.  The value of a share will be the volume-weighted average trading price of the Voting Shares for the five trading days immediately preceding the issuance of such DSU’s.  As at August 31, 2014, the fair value per DSUwas based on a fair value per share of $1.92 (August 31, 2013 – $1.48).  The vesting conditions (which may include time restrictions, performance conditions or a combination of both) of each DSU granted under the DSU Plan, will bedetermined by the Board, and on redemption (which would occur after the holder of the DSUs ceases to serve as a director and is not otherwise employed by the Company) will be paid out in cash. The DSUs are generally non-transferable. Whenever cashdividends are paid on the shares of the Company, additional DSUs will be credited to directors.  The Board may discontinue the DSU Plan at any time or, subject to certain exceptions set out in the DSU Plan, may amend the DSU Plan at anytime.During the year ended August 31, 2014, the Company granted 0.4 million DSUs under the DSU Plan (2013 – nil) (2012 - nominal).  All DSUs issued in the year endedAugust 31, 2014 vested immediately.  During the year ended August 31, 2014, the Company recorded an expense of $0.5 million to compensation expense relating to the DSU Plan (2013 – $0.3 million) (2012 – recovery of $4.8million), with an offset to other non-current liabilities.  Future changes in the fair value of the DSUs will be reflected through adjustments to compensation expense until such a date as the DSUs are settled in cash.  During theyear ended August 31, 2014, the Company settled 19,797 DSUs for a nominal amount (2013 – 62,436 DSUs for $0.1 million) and cancelled 113,198 DSUs for no consideration (2013 – 41,624 DSUs for no consideration).  There were nosuch settlements or cancellations during the year ended August 31, 2012.The aggregate carrying value of the DSU Plan liability was $0.9 million as at August 31, 2014 (August 31, 2013 - $0.4 million)and is recorded in other non-current liabilities on the consolidated statement of financial position.During the year ended August 31, 2014, the Company has recordedcompensation expense of $1.4 million (2013 - $1.4 million) (2012 net recovery of - $2.5 million) relating to its share-based compensation and other long-term incentive plans.    43    16.     INCOMETAXESProvision for income taxesThe provision for income taxes differs from the amount that would haveresulted from applying the statutory tax rate to loss before income taxes for the years ended August 31, 2014, 2013 and 2012 as follows:              2014 2013 2012      (revised - note 2) (revised - note 2)Net lossattributable to equity holders of the Company  (107,461)  (160,226)  (26,033)Statutory income tax rate based on combined federal and provincial rates  26.15%  25.98%  26.30%Tax recovery based onstatutory tax rates  (28,101)  (41,627)  (6,847)              Effectsof:                Non-taxable portion of net capital gains  -   (43)  (150)     Non-deductible expenses (non-taxableincome)  1,569   3,743   (1,334)     Non-deductible portion ofimpairments  -   13,542   -      Non-taxable income on disposition ofdiscontinued operations  -   -   (701)     Tax rate changes on deferred incometaxes       (247)  (440)  (147)     Adjustments in respect of prioryears  55   (1,244)  10      Change in unrecognized deferred income taxassets  26,705   26,069   8,957      Other  19   -   212 Provision for income taxes  -   -   -  The Company’s applicable tax rate is the Canadian combined ratesapplicable in the jurisdictions in which the Company operates.  The increase in the Company’s effective tax rate is due to the change in allocation of income taxes to the various jurisdictions in which the Companyoperates.No taxes have been recorded in other comprehensive income (loss) as the associated deferred tax assets have not been recognized.Deferred income taxCertain of the Company’s intangible assets have indefinite livesand accordingly, as at August 31, 2014 a deferred income tax liability of $0.7 million is not expected to reverse until the assets are disposed of or become amortizable (August 31, 2013 - $0.7 million).  In addition, as at August 31, 2014deferred income tax assets of $23.1 million have been recognized to offset other deferred income tax liabilities, primarily related to property and equipment, intangible assets and goodwill (August 31, 2013 - $41.8 million).   44   As at August 31, 2014 and2013, the Company has not recognized deferred tax assets in respect of the following:    2014 2013Total tax losscarryforwards  260,456   238,600 Other deductible temporary differences  159,636   135,099 Total deductible temporarydifferences  420,092   373,699 Deferred income tax rate  26.15%  25.98%Deferred income taxassets  109,854   97,087 Deferred income tax liabilities  (23,844)  (42,507)Net deferred income tax assets not recognized  86,010   54,580  As at August 31, 2014, the total non-capital tax losses and net-capital losses are as follows:  Year Tax losses Expiring in 2030  34,643 Expiring in 2031  100,291 Expiring in 2032  86,124 Expiring in 2033  12,946 Expiring in 2034  26,035  Total non-capitallosses  260,039  Total net-capital losses (no expiry date)  417  Total loss carryforwards  260,456 17.     CAPITALMANAGEMENTThe Company’s capital management objective is to maximize shareholder returns by (a) prioritizing capital expenditures related to the development of digital media productswith growth potential, and (b) utilizing the majority of remaining free cash flow for the repayment of debt.  There were no changes in the Company’s approach to capital management during the year ended August 31, 2014.TheCompany’s capital structure is composed of equity and long-term debt, less both net assets related to derivative financial instruments and cash.  The capital structure as at August 31, 2014 and 2013 is as follows:    As atAugust 31,2014 As atAugust 31,2013      (revised - note2)        Long-term debt (note12)  486,300   486,880 Net assets related toderivative financial instruments (note 6)  (18,392)  (16,802)Cash  (30,490)  (40,812)Net liabilities  437,418   429,266 Equity  10,944   134,233 Total capital  448,362   563,499  The Company’s capital structure decreased $115.1 million in theyear ended August 31, 2014, primarily as a result of comprehensive loss for the year ended August 31, 2014.    45   18.     FINANCIAL INSTRUMENTSAND FINANCIAL RISK MANAGEMENT As a result of the use of financial instruments, the Company is exposedto credit risk, liquidity risk and market risks relating to foreign exchange and interest rate fluctuations.  The enterprise risk management process is managed by a risk oversight committee composed of senior executives of the Company. Inorder to manage foreign exchange and interest rate risks, the Company used derivative financial instruments to set in Canadian dollars future payments on debts denominated in U.S. dollars (interest and principal). The foreign currency interest rateswap designated as a cash flow hedge matured on July 15, 2014 (note 12). Provided there is no change to the hedged items, the Company does not settle the derivative financial instruments prior to their maturity unless contractually obligated to doso.  These instruments are not held or issued for speculative purposes.(a)      Fair value of financialinstrumentsThe carrying value and fair value of long-term debt and derivative financial instruments as at August 31, 2014 and 2013 are as follows:    As at August 31, 2014 As at August 31, 2013   Carryingvalue   Fair value Carryingvalue   Fair value                  Otherfinancial liabilities                  Long-termdebt  486,300     519,856   486,880     525,538                       Derivativefinancial instruments                      Assets                         Foreign currency interest rateswap  -     -   1,411   (1)  1,411      Embedded derivatives  18,392   (1)  18,392   16,802   (1)  16,802                                             (1) Net derivative financial instruments asset (Level 3) of $18.4 million (2013 - $18.2 million) are reconciled in the table below. The fair value of long-term debt is estimated based on quoted marketprices when available or on valuation models.  When the Company uses valuation models, the fair value is estimated using discounted cash flows using market yields or the market value of similar instruments with similar terms and creditrisk.The Company has considered the following fair value hierarchy that reflects the significance of the inputs used in measuring its financial instruments accounted for at fair valuein the statement of financial position:Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;Level 2: inputs other than quoted prices included in Level 1 thatare observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); andLevel 3: inputs that are not based on observable market data(unobservable inputs).    46   The fair value of the foreign currency interest rate swap recognized on the statement of financial position is estimated as per the Company’s valuationmodels.  These models project future cash flows and discount the future amounts to a present value using the contractual terms of the derivative instrument and factors observable in external markets data, such as period-end swap rates andforeign exchange rates (Level 2 inputs). An adjustment is also included to reflect non-performance risk impacted by the financial and economic environment prevailing at the date of the valuation in the recognized measure of the fair value of thederivative instruments by applying a credit default premium estimated using a combination of observable and unobservable inputs in the market (Level 3 inputs) to the net exposure of the counterparty or the Company.  The fair value of earlyprepayment options recognized as embedded derivatives is determined by option pricing models using Level 3 market inputs, including credit risk, volatility and discount factors.The Company’s policy is to recognize transfers in and out of the fair value hierarchy levels as of the date of the event or change in circumstances that caused thetransfer.  During the year ended August 31, 2014 there were no transfers within the fair value hierarchy.The changes to the fair value of derivative financial instruments (Level 3)for the years ended August 31, 2014 and 2013 are as follows:    2014 2013        Asset as at beginning of year(note 6)  18,213   5,670 Gain (loss) on derivativefinancial instruments recognized in the statement            ofoperations (note 5)  1,590   (7,306)Gain on cash flow swaprecognized in statement of comprehensive loss  3,994   1,914 Foreign currency exchange gainon cash flow swaps reclassified from accumulated           othercomprehensive loss to the statement of operations (note 6)  2,917   11,253 Loss on cash flow swapreclassified from accumulated other comprehensive loss           to thestatement of operations  (2,173)  (2,294)Cash settlements of derivative financial instruments  (6,149)  8,976 Asset as at end of year (note 6)  18,392   18,213  (b)      Credit risk managementCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its contractual obligations.The maximum credit exposure to credit risk at the reporting date is the carrying value of cash, accounts receivable and derivative financial instruments in an assetposition.  No collateral is held for any of the counterparties to the above financial assets.   47   Accounts receivableIn the normal course of business, the Company continuously monitors the financial condition of its customers and reviews the credit history of each new customer.  TheCompany’s sales are widely distributed and the largest amount due from any single customer as at August 31, 2014 is $2.7 million or 4% of receivables (August 31, 2013 – $4.5 million or 5%).  The Company establishes an allowancefor doubtful accounts when collection is determined to be unlikely based on the specific credit risk of its customers and historical trends. The allowance for doubtful accounts amounted to $3.4 million as at August 31, 2014 (August 31, 2013 - $3.3million).  As at August 31, 2014, $30.7 million or 48% (2013 - $37.8 million or 46%) of trade accounts receivable is considered past due as per the contractual credit terms and not yet impaired, which is defined as amounts outstandingbeyond normal credit terms and conditions for respective customers.  The amount past due relates to a number of independent customers for whom there is no recent history of default.  The aging analysis of these trade receivablesbased on original invoice terms as at August 31, 2014 and 2013 is as follows:    As atAugust 31,2014 As atAugust 31,2013        30 - 90days  25,296   31,454 Greater than 90 days  5,431   6,364     30,727   37,818  Changes to the allowance for doubtful accounts for the year ended August31, 2014 and 2013 are as follows:    2014 2013        Balance as at beginning ofyear  3,337   3,225 Provision for doubtfulaccounts  614   1,295 Write-offs  (545)  (1,183)Balance as at end of year  3,406   3,337  Derivative financialinstrumentsAs a result of the use of derivative financial instruments, the Company is exposed to the risk of non-performance by a third-party.  The Company used multiplecounterparties when entering into derivative contracts to minimize its concentration exposure.  The Company also used counterparties that have an investment grade credit rating of no less than single “A”.(c)      Liquidity risk managementLiquidity risk is the risk that the Companywill encounter difficulties in meeting its financial obligations associated with financial liabilities that are settled by delivering cash or another financial asset.  The Company manages this exposure risk by using cash on hand, cashgenerated from operations, staggered maturities of long-term debt and derivative financial instruments, available borrowings under the New ABL Facility (note 12), cash flow forecasts and by deferring or eliminating discretionaryspending.   48   Material contractual obligations related to financial instruments include debt repayments and interest on long-term debt and obligations related to derivative instruments, lessfuture receipts on derivative instruments.  These contractual undiscounted obligations and their maturities as at August 31, 2014 are as follows:    Total Less than1 year 1-3 years 3-5 years 5 years ormore                 Accounts payable  8,059   8,059   -   -   - Accruedliabilities  40,800   40,800   -   -   - Finance lease  1,560   -   -   -   1,560 Long-term debt (1)  497,547   12,500   192,960   292,087   - Interest payments (2)  197,069   53,203   107,355   36,511   - Total  745,035   114,562   300,315   328,598   1,560 (1) Contractual principal payments of long-term debt are based on the foreign exchange rate as at August 31, 2014 of US$1:$1.0873.(2) Interest to be paid on long-term debtis based on actual interest rates and the foreign exchange rate as at August 31, 2014 of US$1:$1.0873. (d)      Market riskmanagementMarket risk is the risk that changes in market pricesdue to foreign exchange rates and interest rates will affect the value of the Company’s financial instruments.  The objective of market risk management is to mitigate and control exposures within acceptable parameters whileoptimizing the return on risk.Foreign currencyriskAs at August 31, 2014, approximately 59% of theoutstanding principal on the Company’s long-term debt is payable in US dollars (August 31, 2013 – 56%).  As at August 31, 2013, the Company had entered into derivative financial instruments to reduce the foreign currency riskexposure on 62% of its US dollar denominated long-term debt.  On July 15, 2014 the foreign currency interest rate swap related to the Second-Lien Notes matured (note 12) exposing the Company to foreign currency risk on the entire US$268.6million of Second-Lien Notes outstanding (August 31, 2013 – the un-hedged portion of the Second-Lien Notes of US$101.1 million).  Based on long-term debt outstanding as at August 31, 2014, a $0.01 change in the period-end exchangerate of a Canadian dollar per one US dollar, holding all other variables constant, would have resulted in a $2.7 million increase or decrease to foreign currency exchange losses in the statement of operations.Interest rateriskThe Company’s ABL Facility bore interest atfloating rates while the First-Lien Notes and Second-Lien Notes bear interest at fixed rates.  Therefore, changes in interest rates only exposed the Company to interest rate risk on the portion of the ABL Facility that was drawn, if any,at the time of the interest rate change.  As a result of the termination of the ABL Facility on July 13, 2014 as at August 31, 2014, the Company is not subject to cash flow interest rate risk.  49  19.     COMMITMENTS The Company has entered into various operating lease agreements forproperty, office equipment and vehicles and has various other commitments.  Aggregate future minimum payments under the terms of these commitments are as follows: 2015  22,158 2016  18,830 2017  16,387 2018  10,784 2019  8,457 Thereafter  41,802  20.     RELATED PARTY TRANSACTIONSKey management personnel include the Company’s senior management and all members of theBoard.  Key management personnel compensation for the years ended August 31, 2014, 2013 and 2012 is as follows:    2014 2013 2012Salaries and short-termbenefits  4,307   4,332   3,676 Share-based compensation  1,271   1,250   (2,911)Total compensation  5,578   5,582   765  21.     STATEMENT OF CASH FLOWSThe following amounts compose the netchange in non-cash operating accounts included in cash flows from operating activities in the consolidated statement of cash flows for the years ended August 31, 2014, 2013 and 2012:    2014 2013 2012Accountsreceivable  17,744   8,308   10,631 Inventory  940   595   1,437 Prepaid expenses and otherassets  240   380   5,242 Accounts payable, accruedliabilities and provisions  (19,013)  (1,441)  16,049 Deferred revenue  (469)  (1,270)  (2,377)Other non-current liabilities and provisions  1,465   (1,005)  (217)Changes in non-cash operating accounts  907   5,567   30,765   22.     SEGMENT INFORMATIONThe Company has one operating segment forfinancial reporting purposes, the Newspaper segment. The Newspaper segment publishes daily and non-daily newspapers and operates digital media and online assets including the canada.com network, each newspaper’s online website and Infomart,the Company’s media monitoring service. Its revenue is primarily from advertising and circulation/subscription revenue.   50  Included within digital revenue in theconsolidated statements of operations during the year ended August 31, 2014 is advertising revenue of $58.7 million (2013 - $63.7 million) (2012 - $62.1 million) and circulation/subscription revenue of $29.3 million (2013 - $27.9 million) (2012 -$27.0 million).  Accordingly, aggregate print and digital revenue from advertising for the year ended August 31, 2014 was $434.2 million (2013 - $509.2 million) (2012 - $577.1 million) and aggregate print and digital revenue fromcirculation/subscription was $223.5 million (2013 - $223.8 million) (2012 - $236.2 million). 23.     DIVESTITURES AND DISCONTINUED OPERATIONS On October 18, 2011, the Company enteredinto an asset purchase agreement with affiliates of Glacier Media Inc. (the “Transaction”) to sell substantially all of the assets and liabilities of the Lower Mainland Publishing Group, the Victoria Times Colonist and the VancouverIsland Newspaper Group, collectively herein referred to as the Disposed Properties.  The Disposed Properties were all within the Newspaper segment.  On November 30, 2011, the Company completed the Transaction.  As aresult of the Transaction, the Company has presented the results of the Disposed Properties as discontinued operations.Details of the Transaction and the gain onsale of discontinued operations are as follows: Consideration (1)   Purchase price  86,500 Working capital adjustment andother items  1,450 Transaction costs  (610)Net proceeds  87,340       Carryingvalue of net assets disposed    CurrentAssets       Accountsreceivable  17,023   Inventory  568    Prepaid expensesand other assets  428 Non-CurrentAssets       Property andequipment  27,333    Otherassets  804    Intangibleassets  25,231    Goodwill  12,593 Total assets  83,980 CurrentLiabilities       Accounts payableand accrued liabilities  9,485    Deferredrevenue  2,202 Non-CurrentLiabilities       Other non-current liabilities  2,062 Total liabilities  13,749 Carrying value of net assets disposed  70,231       Gain on sale of discontinued operations, net of tax of nil  17,109 (1) In accordance with the termsand conditions of the Term Loan Facility on November 30, 2011, the Company was required to repay amounts outstanding with the net proceeds of the Transaction (note 12).   51  Net earnings from discontinued operations for the year ended August 31, 2012, is summarized as follows:    2012 (1)Revenues      Printadvertising  27,090    Printcirculation  3,495   Digital  956    Other  535 Totalrevenues  32,076 Expenses      Compensation  12,756   Newsprint  1,218   Distribution  5,117    Other operating  7,611 Operatingincome before depreciation, amortization       and restructuring  5,374 Depreciation  163 Amortization  55 Restructuring and other items  57 Operatingincome  5,099 Interest expense (2)  8,148 Net financing expense relatedto employee benefit plans  537 Gain on sale of discontinued operations  (17,109)Earningsbefore income taxes  13,523 Provision for income taxes  - Net earnings from discontinued operations  13,523 (1)  The Transaction was completed on November 30, 2011, as a result net earnings from discontinuedoperations for the year ended August 31, 2012 relate only to the three months ended November 30, 2011.(2)The Company had allocated interest expense to discontinued operationsrepresenting the portion of interest expense related to the Term Loan Facility that was repaid as a result of the Transaction.  During the year ended August 31, 2012, the Company allocated interest expense of $1.8 million to discontinuedoperations.  In addition, during the year ended August 31, 2012, the repayment of the Term Loan Facility with the proceeds of the Transaction resulted in additional interest expense representing an acceleration of unamortized financingfees and discounts of which $6.4 million had been allocated to discontinued operations. Cash flows from discontinued operations for the years ended August 31, 2012 are summarized as follows:    2012 (1)Cash flows from operatingactivities  2,275 Cash flows from investingactivities (2)  (2,275)Cash flows from financing activities  - Cash flows from discontinued operations  - (1) The Transaction was completed on November 30, 2011, as a result cash flows from discontinued operations for the year ended August 31, 2012 relate onlyto the three months ended November 30, 2011.(2) The cash flows from discontinued operations were transferred to the Company through a centralized cash management system resulting in cash flows fromdiscontinued operations for the years ended August 31, 2012 of nil.   52  24.     SUBSEQUENT EVENTS On October 6, 2014, the Company entered into a definitive agreement withQuebecor Media Inc. to purchase Sun Media Corporation’s 175 English language newspapers, specialty publications and digital properties (“Sun Media”) for cash consideration of approximately $316 million less a $10 million adjustment primarily related to certain real estate properties to be disposed of by Sun Media prior to closing, and other customary adjustments to be determined subsequent toclosing. The Company has not completed the valuation of assets acquired and liabilities assumed.  The Company will finance the acquisition through a combination of debt and equity. The debt financing will be provided through the issuanceof an additional $140 million principal amount of First-Lien Notes to an existing Noteholder. The Company has entered into a subscription agreement with this existing Noteholder in which it has agreed to purchase subscription receipts representingthe entire amount of the additional First-Lien Notes. The subscription receipts will bear interest at the same rate as the First-Lien Notes and will automatically be exchanged for the additional First-Lien Notes on completion of the acquisition, forno additional consideration.The Company intends to raise the balance of the funds required for the acquisition by way of a rights offering of subscription receipts (the “Rights Offering”) forgross proceeds of $186 million less net proceeds from real estate sales of up to $50 million, to the extent available, prior to the launch of the Rights Offering. Postmedia has entered into a standby purchase agreement with its largest shareholder,GoldenTree Asset Management LP (“GoldenTree”), pursuant to which GoldenTree has agreed to take up any subscription receipts not otherwise subscribed for under the Rights Offering. In connection with its backstop of the rights offering,GoldenTree will enter into a voting restriction agreement with Postmedia that will limit the number of votes that GoldenTree will be entitled to cast at any meeting of Postmedia’s shareholders to 33 1/3%, less one share, of the total number ofoutstanding voting rights in respect of all of the issued and outstanding shares at such time, regardless of how many shares GoldenTree owns at such time.  The Rights Offering will be subject to regulatory approval.  Under theterms of the Rights Offering, shareholders of the Company as of a record date, which is yet to be determined, will receive rights to subscribe for subscription receipts of the Company. Each subscription receipt will be automatically exchanged forone Variable Voting Share on completion of the acquisition, without additional consideration. The subscription price under the Rights Offering will be not more than $1.10 and at a significant discount to the market price of the Variable VotingShares at the time the Rights Offering.On October 16, 2014 the Company entered into a New ABL Facility for an aggregate amount of up to $20.0 million.  The New ABL Facility will replace the Company’sABL Facility that matured on July 13, 2014. The New ABL Facility will mature one year from the closing date and will be secured on a first-priority basis by accounts receivable, cash and inventory of Postmedia Network and any related assets of theCompany and on a third priority basis by the First-Lien Notes collateral.Subsequent to August 31, 2014, the Company received certification fromthe Ontario Digital Media Corporation that digital media tax credits totaling a cash claim of $17.3 million for the year ended August 31, 2012 were eligible to be claimed. The Company intends to refile the tax return for the year ended August 31,2012 to reflect such claim and will be subject to audit by the Canada Revenue Agency. The digital media tax credits are subject to estimation uncertainty and have not been recorded in the consolidated statement of financial position as at August 31,2014.  The Company will record the digital media tax credits as a recovery in the statement of operations when there is reasonable assurance that the Company has complied with the conditions attached to the claim. Subsequent to August 31, 2014, all conditions were waived related to an agreement to sell the Montreal Gazette production facility and equipment for gross proceeds of $12.5million.  The sale is expected to close on October 31, 2014 and the net proceeds will be used to reduce the amount of the Rights Offering.   53