Cogeco 2010 Annual Report Download - page 69

68 COGECO CABLE INC. 2010 Consolidated Financial Statements
Plan assets consist of:
2010 2009
% %
Equity securities 54 53
Debt securities 45 46
Other 1 1
Total 100 100
The significant weighted average assumptions used in measuring the Corporation’s pension and other obligations are as follows:
2010 2009
% %
Accrued benefit obligation
Discount rate 5.50 6.25
Rate of compensation increase 3.25 4.50
Defined benefit pension costs
Discount rate 6.25 6.00
Expected long-term rate of return on plan assets 6.75 6.75
Rate of compensation increase 4.50 4.50
18. Financial and capital management
A) Financial management
Management’s objectives are to protect Cogeco Cable Inc. and its subsidiaries against material economic exposures and variability of results,
and against certain financial risks including credit risk, liquidity risk, interest rate risk and foreign exchange risk.
Credit risk
Credit risk represents the risk of financial loss for the Corporation if a customer or counterparty to a financial asset fails to meet its contractual
obligations. The Corporation is exposed to credit risk arising from the derivative financial instruments, cash and cash equivalents and trade
accounts receivable, the maximum exposure of which is represented by the carrying amounts reported on the balance sheet.
Credit risk from the derivative financial instruments arises from the possibility that counterparties to the cross-currency swap and interest rate
swap agreements may default on their obligations in instances where these agreements have positive fair values for the Corporation. The
Corporation reduces this risk by completing transactions with financial institutions that carry a credit rating equal to or superior to its own credit
rating. The Corporation assesses the creditworthiness of the counterparties in order to minimize the risk of counterparties default under the
agreements. At August 31, 2010, management believes that the credit risk relating to its swaps is minimal, since the lowest credit rating of the
counterparties to the agreements was A.
Cash and cash equivalents consist mainly of highly liquid investments, such as money market deposits. The Corporation has deposited the
cash and cash equivalents with reputable financial institutions, from which management believes the risk of loss to be remote.
The Corporation is also exposed to credit risk in relation to its trade accounts receivable. In the current global economic environment, the
Corporation’s credit exposure is higher but it is difficult to predict the impact this could have on the Corporation’s accounts receivable balances.
To mitigate such risk, the Corporation continuously monitors the financial condition of its customers and reviews the credit history or worthiness
of each new major customer. At August 31, 2010, no customer balance represents a significant portion of the Corporation’s consolidated trade
receivables. The Corporation establishes an allowance for doubtful accounts based on specific credit risk of its customers by examining such
factors as the number of overdue days of the customer’s balance outstanding as well as the customer’s collection history. The Corporation