Rogers 2008 Annual Report Download - page 112

108 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to mitigate credit risk and has also established procedures to
suspend the availability of services when customers have fully
utilized approved credit limits or have violated established payment
terms. While the Company’s credit controls and processes have been
effective in mitigating credit risk, these controls cannot eliminate
credit risk and there can be no assurance that these controls will
continue to be effective or that the Company’s current credit loss
experience will continue.
There is no significant credit risk related to the Company’s
investments. Credit risk is managed through conducting financial
and other assessments of these investments on an ongoing basis.
Credit risk of Cross-Currency Swaps arises from the possibility
that the counterparties to the agreements may default on their
respective 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 minimize the risk of counterparty default under the
agreements. All of the portfolio is held by financial institutions
with a Standard & Poor’s 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 Cross-Currency Swaps
due to the Company’s assessment of the creditworthiness of the
counterparties. The obligations under U.S. $5,550 million aggregate
notional amount of the Cross-Currency Swaps are unsecured and
generally rank equally with the Company’s senior indebtedness.
The credit risk of the counterparties is taken into consideration in
determining fair value for accounting purposes (note 15(d)).
(C) LIQUIDITY RISK:
Liquidity risk is the risk that the Company will not be able to meet
its financial obligations as they fall due. The Company manages
liquidity risk through the management of its capital structure and
financial leverage, as outlined in note 21 to the consolidated financial
statements. It also manages liquidity risk by continuously monitoring
actual and projected cash flows to ensure that it will have sufficient
liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or
risking damage to the Company’s reputation. At December 31, 2008,
the undrawn portion of the Company’s bank credit facility was
approximately $1.8 billion. Utilizations include advances borrowed
under the bank credit facility and issuances of letters of credit.
15. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
(A) OVERVIEW:
The Company is exposed to credit risk, liquidity risk and market risk.
The Company’s primary risk management objective is to protect
its income and cash flows and, ultimately, shareholder value.
Risk management strategies, as discussed below, are designed
and implemented to ensure the Company’s risks and the related
exposures are consistent with its business objectives and risk
tolerance.
(B) CREDIT RISK:
Credit risk represents the financial loss that the Company would
experience if a counterparty to a financial instrument, in which the
Company has an amount owing from the counterparty, failed to
meet its obligations in accordance with the terms and conditions of
its contracts with the Company.
The Company’s credit risk is primarily attributable to its accounts
receivable. The amounts disclosed in the consolidated balance
sheets are net of allowances for doubtful accounts, estimated by
the Company’s management based on prior experience and their
assessment of the current economic environment. The Company
establishes an allowance for doubtful accounts that represents its
estimate of incurred losses in respect of accounts receivable. The
main components of this allowance are a specific loss component
that relates to individually significant exposures and an overall loss
component established based on historical trends. At December
31, 2008, the Company had accounts receivable of $1,403 million
(2007 – $1,245 million), net of an allowance for doubtful accounts
of $163 million (2007 – $151 million), which adequately reflects the
Company’s credit risk. At December 31, 2008, $614 million (2007 –
$598 million) of accounts receivable is considered past due, which is
defined as amounts outstanding beyond normal credit terms and
conditions for the respective customers. The Company believes that
its allowance for doubtful accounts is sufficient to reflect the related
credit risk.
The Company believes that the concentration of credit risk of
accounts receivable is limited due to its broad customer base,
dispersed across varying industries and geographic locations
throughout Canada.
The Company has established various internal controls, such as
credit checks, deposits on account and billing in advance, designed