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August 1, 2005

VIA EDGAR AND FACSIMILE

Mr. Kevin Kuhar

Staff Accountant

Securities and Exchange
Commission

Division of Corporation
Finance

101 F Street, N.E., Mail
Stop 6010

Washington, DC 20549

Re:          NovAtel Inc.

Form 20-F for the Year Ended December 31, 2004

Filed May 24, 2005 (File No. 000-29004)

Dear Mr. Kuhar:

This letter
sets forth the response of NovAtel Inc. (the “Company”) to the comments set
forth in the Staff’s letter dated June 28, 2005 in connection with the
Company’s Annual Report on Form 20-F for the year ended December 31,
2004, File No. 000-29004, filed with the Securities and Exchange
Commission on May 24, 2005 (the “Annual Report”).  For your convenience, we have set forth the
comments in the Staff’s letter followed by the Company’s response.

Form 20-F
for the Fiscal-Year Ended December 31, 2004

Item 15.
Controls and Procedures, page 67

1.             We
note your disclosure that management has concluded that your disclosure
controls and procedures are “effective and designed to ensure that material
information relating to the Company should be made known to them by others
within those entities.” The language that is currently included after the word “effective”
in your disclosure appears to be superfluous, since the meaning of “disclosure
controls and procedures” is established by Rule 13a-15(e) of the
Exchange Act. However, if you do not wish to eliminate this language, please
revise future filings so that the language that appears after the word “effective”
is substantially similar in all material respects to the language that appears
in the entire two-sentence definition of “disclosure controls and procedures”
set forth in Rule 13a-15(e).

Response:

The Company notes the Staff’s comments and
will eliminate the additional language in future filings.

Note 2
Significant Accounting Policies, page F-8

n) Investment
Tax Credits, page F-11

2.             We
see on page F-5 that in 2004 you recorded a benefit from investment tax
credits of CDN$4.4 million and see you presented this amount as income from
continuing operations before income taxes. Please respond in detail to the
following:

•      We
note you account for investment tax credits using the cost reduction method
under Canadian generally accepted accounting principles. Please tell us how US.
generally accepted accounting principles requires you to account for the
recognition of the investment tax credits. Provide an enhanced discussion of
the events that occurred which lead to its recognition and the journal entries
you recorded in connection with the 2004 investment tax credit transactions.
Additionally, please cite the accounting literature upon which you relied to
support your U.S. generally accepted accounting principles accounting
requirements for investment tax credits.

•      We
also note that you have presented the investment tax credit benefit as part of
income from continuing operations before income taxes. Please explain how you
determined this was the proper presentation of the benefit under U.S. generally
accepted accounting principles and cite the authoritative literature upon which
you relied to make this conclusion.

Consider the need to revise Note 22 to
quantify and disclose all accounting and presentation differences between US.
and Canadian generally accepted accounting principles. We may have further
comments based on your response.

Response:

U.S. generally accepted accounting principles
(“U.S. GAAP”) requires investment tax credits to be accounted for using either
the cost reduction method or the flow-through method.  The authoritative literature governing the
accounting for investment tax credits is discussed in Accounting Principle
Board Opinion (“APB”) No. 2 and No. 4, Accounting
for the “Investment Credit”.
The excerpts below outline the authoritative literature applied by the
Company in accounting for the investment tax credits for U.S. GAAP purposes.

Paragraph 10 of APB No. 4 states, in
part:

10.           In
the circumstances the Board believes that, while the method of accounting for
the investment credit recommended in paragraph 13 of Opinion No. 2 should
be considered to be preferable, the alternative method of treating the credit
as a reduction of Federal income taxes of the year in which the credit arises
is also acceptable.

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Paragraph 9 of APB No. 2 states, in
part:

9.             Cost
reduction.  We believe that the
interpretation of the investment credit as a reduction in or offset against a
cost otherwise chargeable in a greater amount to future accounting periods is
supported by the weight of the pertinent factors and is based upon existing
accounting principles.

By way of background and for the Staff’s
information, Canadian generally accepted accounting principles (“Canadian GAAP”)
only permits the use of the cost reduction method as discussed in CICA Handbook
Section 3805, Investment Tax Credits
(“CICA S.3805”).  For
U.S. GAAP purposes, the Company elected to use the cost reduction method, as
permitted by APB No. 2, in an effort to not create a significant
difference between Canadian and U.S. GAAP.

Paragraph 12 of APB No. 2, also states:

12.           In
concluding that the cost reduction concept is based upon existing accounting
principles we attach substantial weight to two points in particular.  First, in our opinion, earnings arise from
the use of facilities, not from their acquisition.  Second, the ultimate realization of the
credit is contingent to some degree on future developments.  Where the incidence of realization of income
is uncertain, as in the present circumstances, we believe the record does not
support the treatment of the investment credit as income at the earliest
possible point of time.  In our
opinion the alternative choice of spreading the income in some rational manner
over a series of future accounting periods is more logical and supportable.

Paragraph 12 states that the investment tax
credits should be accrued when an enterprise has made the qualifying
expenditures provided there is reasonable assurance that the credits will be
realized.  This recognition concept is
consistent with Canadian GAAP as described in CICA S.3805.

Discussion
of Events Leading to Recognition of Investment Tax Credits

The $4.4 million benefit for investment tax
credits is comprised of two entries:

(i)            $2.1
million related to the recognition of a future income tax asset

(ii)           $2.3
million related to the use of investment tax credits to reduce taxes payable in
2004

As of December 31, 2004, the Company
estimated that it had approximately $160 million of tax shields, including $6.4
million of investment tax credits, available to reduce future taxable income
and taxes payable, primarily for Canadian tax purposes.

(i)            Prior
to 2004, the Company had established a full valuation allowance against the
calculated tax benefits, since it was uncertain that these tax benefits were

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more likely than not to be realized.  In determining the valuation allowance to
establish against these deferred tax benefits, the Company considered many
factors, including the specific taxing jurisdiction, the carry forward period,
income tax strategies, limitations due to acquisitions-of-control and
forecasted earnings.  A valuation
allowance was recognized if, based on the weight of available evidence, the
Company concluded that it was more likely than not that some portion or all of
the deferred tax benefits would not be realized.  In 2004, the Company determined that it was
more likely than not that a portion of the future income tax assets would be
realized.  This determination was largely
based on the four consecutive years of increasing profitability from 2001 to
2004 and the Company’s forecasts of operating results for the foreseeable
future.

Accordingly, the Company recognized future
income tax assets of $3.2 million on its balance sheet as of December 31,
2004, and a corresponding $1.1 million future income tax benefit and $2.1
million benefit of investment tax credits in its statement of operations for
the year ended December 31, 2004.
The $1.1 million future income tax benefit relates to tax deductible
research and development expenses which are available to reduce future taxable
income.  The accounting recognition of
the investment tax credit was appropriate in the quarter ended December 31,
2004 as there now was reasonable assurance regarding the realizability of the
investment tax credit for Canadian and U.S. GAAP purposes.

The related journal entries for Canadian and
U.S. GAAP purposes were as follows:

  Future income tax asset – current portion

  $

  1,286K

  Future income tax asset – long term portion

  $

  1,903K

  Benefit from investment tax credits

  $

  2,098K

  Future income tax benefit

  $

  1,091K

(ii)           In
addition, as of December 31, 2004, the Company also expected to use $2.3
million of investment tax credits to reduce current income taxes payable for
the fiscal year ended December 31, 2004.
The Company’s tax year end is March 31, 2005.

In recent prior years, the Company had used
tax operating losses to offset current taxes payable.  The available pool of tax operating losses
for Canadian tax purposes were fully consumed or expired by March 31,
2004, which necessitated the use of other tax shields, including investment tax
credits to offset current taxes payable.
As such, the Company used investment tax credits to shelter current
federal Canadian income tax payable for the December 31, 2004 year, since
the investment tax credits have a ten-year life, whereas the majority of our
other tax shields do not have an expiry date, and

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there was reasonable assurance regarding the
realizability of the investment tax credits based on the Company’s ability to
use the investment tax credits to shelter current taxes payable.

The related journal entries for Canadian and U.S.
GAAP purposes were as follows:

  Income taxes – current provision

  $

  2,258K

  Taxes payable

  $

  2,258K

  (included in Accounts payable and accrued
  liabilities)

  Taxes
  payable

  $

  2,258K

  (included in Accounts payable and accrued
  liabilities)

  Benefit of investment tax credits

  $

  2,258K

Presentation

APB No. 2 discusses the general concept
of investment tax credit in relation to the acquisition of certain depreciable
assets.

Paragraph 1 of APB No. 2 states in part:

1.             The
Revenue Act of 1962 provides for an “investment credit” which, in general, is
equal to a specified percentage of the cost of certain depreciable assets
acquired and placed in service after 1961.

Paragraph 9 of APB No. 2, referenced
above, states that the benefit of the investment tax credit would be recognized
as a “reduction in or offset against a cost otherwise chargeable in a greater
amount to future accounting periods.”  In
the Company’s circumstances, the investment tax credits were generated by the
Company making qualifying research and development expenditures under a
Canadian federal tax program which incentivized certain research and
development activities, not as part of an asset purchase as contemplated by Paragraph
1 of APB No. 2.

The Company’s investment tax credits have a ten-year
life and the $4.4 million investment tax credits recognized in 2004 were
initially from qualifying research and development expenditures in 1996 to
2002.  Since the $4.4 million of investment
tax credits recognized in 2004 did not relate to the current year’s research
and development expenses, but rather to those of 1996 to 2002, the Company
concluded that the appropriate presentation of the “Benefit of investment tax
credits” should be a separate line item presented in the non-operating section of
the statement of operations.  An
alternative presentation would have been a reduction of the research and
development

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expenses in 2004, which would have had reduced
our research and development expenses on our statement of operations from $9.6
million to $5.2 million.  In our
judgment, this presentation would have provided potentially misleading
information, as a reader of the financial statements could conclude that
research and development expenses were declining in 2004 in comparison to 2003,
when in fact, these expenses increased by 35%.

Based on the above analysis and upon further
review, the Company respectfully advises the Staff that it does not believe that
Note 22 to the Consolidated Financial Statements for the year ended December 31,
2004 requires revision.

The Company
hereby acknowledges that:

•      the
Company 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
Company 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 do not
hesitate to call me at (403) 295-4550 if you have any questions or would like
any additional information regarding this matter.

Very truly yours,

Werner Gartner

EVP and CFO

NovAtel, Inc.

cc:           Jay
Webb (Securities and Exchange Commission)

Brett Cooper (Orrick, Herrington &
Sutcliffe LLP)

Raj Bhogal (Deloitte & Touche LLP)

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