Westjet 2015 Annual Report Download - page 40

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WestJet Annual Report 2015 | 38
to fix the interest rates over the term of all such debt. The swap agreements were designated as cash flow hedges for
accounting purposes.
For a discussion of the nature and extent of our use of interest rate swap agreements, including the business purposes they
serve, the financial statement classification and amount of income, expense, gain and loss associated with these instruments
and the significant assumptions made in determining their fair value, please refer to
Liquidity and Capital Resources –
Financing
on page 31 of this MD&A.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation. At December 31, 2015, our credit exposure consisted primarily of the carrying amounts of cash and
cash equivalents, restricted cash, accounts receivable, operating deposits, aircraft deposits and the fair value of derivative
financial assets.
Our maximum exposure to credit risk is represented by the balances in the aforementioned accounts:
($ in thousands)
2015
2014
Cash and cash equivalents
(i)
1,183,797 1,358,071
Restricted cash
(i)
68,573 58,149
Accounts receivable
(ii)
82,136 54,950
Other deposits
(iii)
26,675 25,204
Aircraft deposits
(iv)
319,019 509,684
Derivative financial assets
(v)
17,409 6,409
(i) Consist of bank balances and short-term investments with terms of up to 31 days. Credit risk associated with cash and cash equivalents and restricted cash
is minimized substantially by ensuring that these financial assets are invested primarily in debt instruments with highly rated financial institutions, some with
provincial-government-backed guarantees. The Corporation manages its exposure by assessing the financial strength of its counterparties and by limiting the
total exposure to any one individual counterparty.
(ii) All significant counterparties, both current and new, are reviewed and approved for credit on a regular basis under the Corporation's credit management
processes. The Corporation does not hold any collateral as security, however, in some cases the Corporation requires guaranteed letters of credit with
certain of its counterparties. Trade receivables are generally settled within 30 to 60 days. Industry receivables are generally settled in less than 30 days.
(iii) The Corporation is not exposed to counterparty credit risk on certain deposits related to aircraft financing, as the funds are held in a security trust separate
from the assets of the financial institution. While the Corporation is exposed to counterparty credit risk on its deposit relating to airport operations, it
considers this risk to be remote because of the nature and size of the counterparty.
(iv) The Corporation is exposed to counterparty credit risk on aircraft deposits with aircraft manufacturers. The Corporation considers this risk to be remote
given the size and credit quality of the manufacturers.
(v) Derivative financial assets consist of foreign exchange forward contracts and interest rate swap contracts. The Corporation reviews the size and credit rating
of both current and any new counterparties in addition to limiting the total exposure to any one counterparty.