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84 COGECO CABLE INC. 2013 Consolidated financial statements
Years ended August 31, 2013 2012
(In thousands of Canadian dollars) $$
Defined benefit pension costs
Current service cost 1,967 1,451
Interest cost 1,205 1,147
Expected return on plan assets (865)(803)
Net benefit cost 2,307 1,795
The expected employer contributions to the Corporation's defined benefit pension plans will be $4,840,000 in 2014.
Plan assets consist of:
At August 31, 2013 2012
%%
Equity securities 64 61
Debt securities 29 29
Other 710
Total 100 100
The significant weighted average assumptions used in measuring the Corporation's pension and other obligations are as follows:
At August 31, 2013 2012
%%
Accrued benefit obligation
Discount rate 4.50 3.90
Rate of compensation increase 3.00 3.00
Defined benefit pension costs
Discount rate 3.90 4.70
Expected long-term rate of return on plan assets 4.50 6.00
Rate of compensation increase 3.00 3.00
20. FINANCIAL INSTRUMENTS
A) FINANCIAL RISK MANAGEMENT
Management’s objectives are to protect the Corporation and its subsidiaries against material economic exposures and variability of results,
and against certain financial risks including credit, liquidity, interest rate and foreign exchange risks.
Credit risk
Credit risk represents the risk of financial loss for the Corporation if a customer or counterparty to a financial asset fails to meet its contractual
obligations. The Corporation is exposed to credit risk arising from the derivative financial instruments, cash and cash equivalents and trade
accounts receivable, the maximum exposure of which is represented by the carrying amounts reported on the statement of financial position.
Credit risk from derivative financial instruments arises from the possibility that counterparties to the cross-currency swaps and interest rate
swaps may default on their obligations in instances where these agreements have positive fair values for the Corporation. The Corporation
reduces this risk by completing transactions with financial institutions that carry a credit rating equal to or superior to its own credit rating. The
Corporation assesses the creditworthiness of the counterparties in order to minimize the risk of counterparties default under the agreements.
At August 31, 2013, management believes that the credit risk relating to its derivative financial instruments is minimal, since the lowest credit
rating of the counterparties to the agreements is “A” by Standard & Poor’s rating services (“S&P”) and “AA (low)” by Dominion Bond Rating
Services (“DBRS”).
Cash and cash equivalents consist mainly of highly liquid money market short-term investments. The Corporation has deposited the cash
and cash equivalents with reputable financial institutions, for which management believes the risk of loss to be remote. At August 31, 2013,
management believes that the credit risk relating to its short-term investments is minimal, since the credit rating related to such investment
is “A-1+” by S&P.