Rogers 2006 Annual Report Download - page 103

99
RO GER S CO MMU NIC AT ION S IN C . 20 0 6 ANN UA L RE POR T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18 F INANCIAL IN STRU MENTS
(A) FAIR VALUES:
The Company has determined the fair values of its financial instru-
ments as follows:
(i) The carrying amounts in the consolidated balance sheets of
accounts receivable, bank advances arising from outstanding
cheques and accounts payable and accrued liabilities approxi-
mate fair values because of the short term nature of these
financial instruments.
(ii) Investments:
The fair values of investments that are publicly traded are deter-
mined by the quoted market values for each of the investments
(note 12). Management believes that the fair values of other invest-
ments are not significantly different from their carrying amounts.
(iii) Long -term receivables:
The fair values of long-term receivables approximate their carrying
amounts since the interest rates approximate current market rates.
(iv) Long-term debt and derivative instruments:
The fair values of each of the Company’s long-term debt instruments
are based on the year-end trading values.
The fair values of the Company’s interest exchange agreements,
cross-currency interest rate exchange agreements and other deriva-
tive instruments are based on values quoted by the counterparties to
the agreements.
The estimated fair values of the Company’s long-term debt and
related derivative instruments as at December 31, 2006 and 2005 are
as follows:
2006 2005
Carrying Estimated Carrying Estimated
amount fair value amount fair value
Liability:
Long-term debt $ 6,988 $ 7,397 $ 7,739 $ 8,095
Derivative instruments (1) 722 1,294 738 1,336
$ 7,710 $ 8,691 $ 8,477 $ 9,431
(1) Excludes deferred transitional gain of $54 million (2005 – $63 million).
At December 31, 2006, 85.6% of U.S. dollar-denominated debt (2005 –
85.2%) was protected from fluctuations in the foreign exchange
between the U.S. and Canadian dollars by derivative instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Credit risk of the interest exchange agreements and cross-currency
interest rate exchange agreements arises from the possibility that
the counterparties to the agreements may default on their respec-
tive obligations under the agreements in instances where these
agreements have positive fair value for the Company. The Company
assesses the creditworthiness of the counterparties in order to mini-
mize the risk of counter party default under the agreements. All of
the portfolio is held by financial institutions with a Standard & Poors
rating (or the equivalent) ranging from A+ to AA+. The Company
does not require collateral or other security to support the credit risk
associated with the interest exchange agreements and cross-currency
interest rate exchange agreements due to the Company’s assessment
of the creditworthiness of the counterparties. The obligations under
U.S. $4,475 million (2005 – U.S. $4,802 million) aggregate notional
amount of the cross-currency interest rate exchange agreements are
secured by substantially all of the assets of the respective subsidiary
companies to which they relate and generally rank equally with the
other secured indebtedness of such subsidiary companies.
(v) Other long-term liabilities:
The carrying amounts of other long-term liabilities approximate fair
values as the interest rates approximate current rates.
(B) OTHER DISCLOSURES:
The Company does not have any significant concentrations of credit
risk related to any financial asset.