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Correspondance Response Letter

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BY ELECTRONIC SUBMISSION

December 5, 2005

United States Securities
and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C.

U.S.A. 20549-0406

     Attention:
     Kathleen Collins

Accounting Branch Chief

     Subject:
     Cognos Incorporated

Form 10-K for the fiscal year ended February 28, 2005

and Form 10-Q for the fiscal quarter ended August 31, 2005

(file no. 033-72402)

Ladies and Gentlemen:

This letter is being furnished in
response to comments contained in the letter dated November 17, 2005 (the
“Letter”) from Kathleen Collins, Accounting Branch Chief, of the Staff
(the “Staff”) of the U.S. Securities and Exchange Commission (the
“Commission”) to Tom Manley, Senior Vice President, Finance and
Administration, of Cognos Incorporated (the “Corporation”). The comments
and the Corporation’s responses are set forth below and are keyed to the sequential
numbering of the comments and the headings used in the Letter.

Form 10-K for the fiscal
year ended February 28, 2005

Critical Accounting
Estimates, page 44

COMMENT

1.

We
note in your revenue recognition disclosures that “the fair value of the
          product support portion of the arrangement is based on the product support
          renewal rate if product support is negotiated separately and the rate is
          reflective of the expected renewal rate for the first support period not
covered           by the arrangement.” Tell us how you determined that the
negotiated product           support rate and the renewal rate for the first support
period met the           substantive test for establishing VSOE for product support. In
this regard, help           us understand whether the price charged for product support
renewals are           different for each customer.

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RESPONSE

The Staff is supplementally advised
that the Corporation’s standard approved price list for product support is based on
an annual term and a percentage of software license revenue. Product support amounts
and/or stated renewal rates included in its order agreements are negotiated based on these
standard approved price lists. For revenue recognition purposes, the Corporation ensures
that the negotiated product support, as expressed as a percentage of the license amount,
is within a predetermined reasonable range for similar customer classes. These ranges are
substantive as the Corporation validates these ranges based on (a) the pricing that it has
historically been able to negotiate with other similar customer classes for initial term
product support and (b) the Corporation’s historical ability to renew such initial
product support pricing at substantially the same pricing.

In situations where the negotiated
percentage is not considered substantive in term or amount, for revenue recognition
purposes, an additional portion of the arrangement fee will be allocated to product
support based on the reasonable ranges described above to ensure revenue allocated to
product support is consistent with VSOE.

As discussed above, the prices charged
for product support are different for each customer in terms of the dollar amount.
However, the fees are similar in terms of the percentage of software license fees as
discussed under TPA 5100.55.

COMMENT

2.

We
also note that “if product support is not separately negotiated in the
          agreement, product support is separated based on a percentage of negotiated
          license fees consistent with similar transactions.” Please explain what
you           mean by this statement and provide an example of your calculations for
          determining VSOE when product support is not separately negotiated. Do these
          contracts include stated renewal rates or does the Company sell product support
          for these products separately beyond the first year? If so, tell us how you
          determined that the renewal rates or separate sales were not sufficient
evidence           to establish the fair value for product support in these agreements.

RESPONSE

The Staff is supplementally advised
that the statement quoted by the Staff relates to arrangements in which product support is
a named element of an arrangement but is not separately negotiated as part of the order
agreement and no renewal rate is stipulated within the agreement. In these circumstances,
a portion of the arrangement fee will be allocated to product support based on a
percentage of license fees as discussed in the response to Comment 1 above.

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For example, if a customer were to pay
$100,000 for an arrangement which includes license and first year support and no amount is
stated for support and the support renewal rate is not specified, then we would recognize
$83,333 in license and $16,666 (20%) in support. These amounts are based on amounts the
Corporation would expect to negotiate and contract for product support in year two based
on its historical support billings in these situations and in the more typical situations
described in our response to Comment 1. The percentages are in line with the
Corporation’s range of historical renewal rates in similar transactions. For these
reasons, we consider the $16,666 to be VSOE.

COMMENT

3.

We
note in your business section that you continue to provide updates to your
          software products (e.g. Impromptu Web Reports 7.3, Cognos Query 7.3, Cognos
          Metrics Manager 2.2, etc.). Tell us whether these updates are included as part
          of your product support services and whether these updates were specified or
          unspecified to customers that purchased the previous version of the software.
          Tell us how you considered paragraphs 36–38 of SOP 97.2 in accounting for
          updates, as applicable. Please advise.

RESPONSE

The Staff is supplementally advised
that the Corporation’s standard product support service includes rights to upgrades
on a when and if available basis. As such all of the products mentioned in the business
section were made available, prior to disclosure in the business section, to all customers
who owned the previous version of the product and were currently under contract for
product support. As stated, these upgrades were available on a when and if available basis
and were not named in the Corporation’s order agreements. As such, they were treated
as unspecified upgrades for customers who purchased the previous version of the software.
Paragraphs 36–38 of SOP 97-2 deal with specified upgrade rights and as such are not
relevant to these new versions.

Form 10-Q For the
Quarterly Period Ended August 31, 2005

Item 4. Controls and
Procedures, page 55

COMMENT

4.

We
note in your controls and procedures section that you have evaluated the
          disclosure controls and procedures as of an unspecified date that is within 90
          days before the filing date of this quarterly report. Tell us what
consideration           you have given to SEC Release No. 33-8238 which requires that the
evaluation be           done as of the end of the period covered by the annual or
quarterly reports.

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RESPONSE

The Staff is supplementally advised
that the evaluation of our disclosure controls and procedures was done as of the end of
the period. The language will be clarified to reflect that the evaluation is made at the
end of the applicable period for all future filings beginning with the Corporation’s
third quarter 10-Q for the period ending November 30, 2005.

In connection with this response, the
Corporation acknowledges that:

•

The
Corporation is responsible for the adequacy and accuracy of the disclosure in the filing;

•

Staff
comments or changes to disclosure in response to Staff comments do not foreclose the
Commission from taking any action with respect to the filing; and

•

The
Corporation may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.

Please telephone me at (613) 738-1440
with any questions concerning this letter.

Yours truly,

COGNOS INCORPORATED

/s/ Tom Manley

Tom Manley

Senior Vice President, Finance &  Administration

    and Chief Financial Officer

     cc:
     Patrick Gilmore, Staff Accountant

W. John Jussup, General Counsel

Kevin M. Barry, U.S. Securities Counsel

Rob C. Scullion, Ernst & Young