Rogers 2015 Annual Report Download - page 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts
receivable, short-term borrowings, and accounts payable and
accrued liabilities approximate their fair values because of the
short-term nature of these financial instruments.
We determine the fair value of each of our publicly traded
investments using quoted market values. We determine the fair
value of our private investments by using implied valuations from
follow-on financing rounds, third party sale negotiations, or market-
based approaches. These are applied appropriately to each
investment depending on its future operating and profitability
prospects.
The fair values of each of our public debt instruments are based on
the year-end estimated market yields. We determine the fair values
of our debt derivatives and expenditure derivatives using an
estimated credit-adjusted mark-to-market valuation by discounting
cash flows to the measurement date. In the case of debt derivatives
and expenditure derivatives in an asset position, the credit spread
for the financial institution counterparty is added to the risk-free
discount rate to determine the estimated credit-adjusted value for
each derivative. For these debt derivatives and expenditure
derivatives in a liability position, our credit spread is added to the
risk-free discount rate for each derivative.
The fair values of our equity derivatives are based on the quoted
market value of RCI’s Class B Non-Voting shares.
Our disclosure of the three-level fair value hierarchy reflects the
significance of the inputs used in measuring fair value:
• financial assets and financial liabilities in Level 1 are valued by
referring to quoted prices in active markets for identical assets
and liabilities;
• financial assets and financial liabilities in Level 2 are valued using
inputs based on observable market data, either directly or
indirectly, other than the quoted prices; and
• Level 3 valuations are based on inputs that are not based on
observable market data.
There were no material financial instruments categorized in Level 3
as at December 31, 2015 and 2014 and there were no transfers
between Level 1, Level 2, or Level 3 during the respective periods.
The table below shows the financial instruments carried at fair value.
As at December 31
Carrying value Level 1 Level 2
(In millions of dollars) 2015 2014 2015 2014 2015 2014
Financial assets
Available-for-sale, measured at fair value:
Investments in publicly traded companies 966 1,130 966 1,130 ––
Held-for-trading:
Debt derivatives accounted for as cash flow hedges 2,032 853 ––2,032 853
Bond forwards accounted for as cash flow hedges –1–––1
Expenditure derivatives accounted for as cash flow hedges 158 70 ––158 70
Total financial assets 3,156 2,054 966 1,130 2,190 924
Financial liabilities
Held-for-trading:
Debt derivatives accounted for as cash flow hedges 47––47
Bond forwards accounted for as cash flow hedges 91 14 ––91 14
Equity derivatives not accounted for as cash flow hedges 15 30 ––15 30
Total financial liabilities 110 51 ––110 51
The fair value of our long-term debt is estimated as follows:
As at December 31
(In millions of dollars) 2015 2014
Carrying amount Fair value 1Carrying amount Fair value 1
Long-term debt (including current portion) 16,870 18,252 14,787 16,584
1Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy, based on year-end trading values.
We did not have any non-derivative held-to-maturity financial assets during the years ended December 31, 2015 and 2014.
120 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT