Rogers 2014 Annual Report Download - page 114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
We are exposed to credit risk, liquidity risk and market risk. Our
primary risk management objective is to protect our income and cash
flows and, ultimately, shareholder value. We design and implement the
risk management strategies discussed below to ensure our risks and
the related exposures are consistent with our business objectives and
risk tolerance. The table below shows our risk exposure by financial
instrument.
Financial instrument Financial Risks
Financial assets
Cash and cash equivalents Credit and foreign exchange
Accounts receivable Credit and foreign exchange
Investments, available-for-sale Market
Financial liabilities
Short-term borrowings Liquidity
Accounts payable Liquidity
Accrued liabilities Liquidity
Long-term debt Liquidity, foreign exchange and
interest
Derivatives 1
Debt derivatives Credit, liquidity and foreign
exchange
Bond forwards Credit, liquidity and interest
Expenditure derivatives Credit, liquidity and foreign
exchange
Equity derivatives Credit, liquidity and market
1Derivatives can be in an asset or liability position at a point in time historically or in
the future.
CREDIT RISK
Credit risk represents the financial loss we could experience if a
counterparty to a financial instrument, in which we have an amount
owing from the counterparty, failed to meet its obligations under the
terms and conditions of its contracts with us.
Our credit risk is primarily attributable to our accounts receivable. Our
broad customer base limits the concentration of this risk. Our accounts
receivable in the Consolidated Statements of Financial Position are net
of allowances for doubtful accounts, which management estimates
based on prior experience and an assessment of the current economic
environment. Management uses estimates to determine the allowance
for doubtful accounts, taking into account factors such as our
experience in collections and write-offs, the number of days the
counterparty is past due and the status of the account. We believe that
our allowance for doubtful accounts sufficiently reflects the related
credit risk associated with our accounts receivable. As at December 31,
2014, $461 million (December 31, 2013 – $452 million) of gross
accounts receivable are considered past due, which is defined as
amounts outstanding beyond normal credit terms and conditions for
the respective customers.
The table below provides an aging of our customer accounts
receivable as at December 31 and additional information related to the
allowance for doubtful accounts.
(In millions of dollars) 2014 2013
Customer accounts receivables (net of allowance
for doubtful accounts)
Less than 30 days past billing date 713 695
30-60 days past billing date 326 291
61-90 days past billing date 108 94
Greater than 90 days past billing date 62 68
Total 1,209 1,148
The activity related to our allowance for doubtful accounts is as follows:
(In millions of dollars) 2014 2013
Balance, beginning of the year 104 119
Allowance for doubtful accounts expense 77 111
Net use (83) (126)
Balance, end of the year 98 104
We use various internal controls, such as credit checks, deposits on
account and billing in advance, to mitigate credit risk. We monitor and
take appropriate action to suspend services when customers have fully
used their approved credit limits or violated established payment
terms. While our credit controls and processes have been effective in
managing credit risk, they cannot eliminate credit risk and there can be
no assurance that these controls will continue to be effective or that our
current credit loss experience will continue.
Credit risk related to our debt derivatives, bond forwards, expenditure
derivatives and equity derivatives (derivatives) arises from the
possibility that the counterparties to the agreements may default on
their obligations. We assess the creditworthiness of the counterparties
to minimize the risk of counterparty default, and do not require
collateral or other security to support the credit risk associated with
these derivatives. Counterparties to the entire portfolio of our
derivatives are financial institutions with a Standard & Poor’s rating (or
the equivalent) ranging from A- to AA-.
LIQUIDITY RISK
Liquidity risk is the risk that we will not be able to meet our financial
obligations as they fall due. We manage liquidity risk by managing our
commitments and maturities, capital structure and financial leverage,
as outlined in note 3. We also manage liquidity risk by continually
monitoring actual and projected cash flows to ensure that we will have
sufficient liquidity to meet our liabilities when due, under both normal
and stressed conditions, without incurring unacceptable losses or
risking damage to our reputation.
110 ROGERS COMMUNICATIONS INC. 2014 ANNUAL REPORT