Cogeco 2012 Annual Report Download - page 75

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74 COGECO CABLE INC. 2012 Consolidated financial statements
Plan assets consist of:
A
ugust 31,
2012
August 31,
2011
September 1,
2010
% % %
Equity securities 61 61 54
Debt securities 29 38 45
Other 10 1 1
Total 100 100 100
The significant weighted average assumptions used in measuring the Corporation’s pension and other obligations are as follows:
A
ugust 31,
2012
August 31,
2011
September 1,
2010
$ $ $
Accrued benefit obligation
Discount rate 3.90 4.70 5.50
Rate of compensation increase 3.00 3.00 3.25
Defined benefit pension costs
Discount rate 4.70 5.50 6.25
Expected long-term rate of return on plan assets 6.00 6.25 6.75
Rate of compensation increase 3.00 3.25 4.50
20. FINANCIAL INSTRUMENTS
A. FINANCIAL RISK 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, liquidity, interest rate 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
statement of financial position.
Credit risk from derivative financial instruments arises from the possibility that counterparties to the cross-currency swaps 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, 2012, management believes that the credit risk relating to its derivative financial instruments is minimal, since the lowest credit rating
of the counterparties to the agreements is “A-” by Standard & Poor’s rating services (“S&P”) and “A (high)” by Dominion Bond Rating
Services (“DBRS”).
Cash and cash equivalents consist mainly of highly liquid investments, such as Bankers’ acceptances. The Corporation has deposited the
cash and cash equivalents with reputable financial institutions, for which management believes the risk of loss to be remote. At
August 31, 2012, management believes that the credit risk relating to its short-term investments is minimal, since the lowest credit rating of
the counterparties to the agreements is “A-” by S&P and “R1 (high)” by DBRS.