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Consolidated financial statements COGECO CABLE INC. 2014 91
Salary risk
The present value of the defined benefit obligation is calculated using management's best estimate of the following actuarial assumption
for each identified risk:
Risk Assumption Change in assumption Potential impact
Salary Expected rate of compensation
increase of plan members
Increase in the expected rate of
compensation increase of plan
members Increase
B) SENSITIVITY ANALYSIS
The sensitivity analyses of the defined benefit obligation were calculated based on reasonably possible changes to each key actuarial
assumption without considering simultaneous changes to several key actuarial assumptions. A change in one actuarial assumption could
trigger a change in another actuarial assumption, which could amplify or mitigate the impact of the change in these assumptions on the
present value of the defined benefit obligation. The sensitivity analyses were prepared in accordance with the Corporation's accounting
policies described in Note 2 K). The actual results of items subject to estimates may differ.
Change in
assumption Impact of change
in assumption
% $
Discount rate 0.10 393
Expected rate of compensation increase 0.25 70
21. FINANCIAL INSTRUMENTS
A) FINANCIAL RISK MANAGEMENT
Management’s objectives are to protect the Corporation and its subsidiaries against material economic exposures and variability of results,
and against certain financial risks including credit, liquidity, interest rate and foreign exchange risks.
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 and interest rate 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, 2014, 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 “AA (low)” by Dominion Bond Rating
Services (“DBRS”).
Cash and cash equivalents consist mainly of highly liquid money market short-term investments. 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, 2014,
management believes that the credit risk relating to its short-term investments is minimal, since the credit rating related to such investments
is “A-1+” by S&P.
The Corporation is also exposed to credit risk in relation to its trade accounts receivable. To mitigate such risk, the Corporation continuously
monitors the financial condition of its customers and reviews the credit history or worthiness of each new large customer. At August 31, 2014
and August 31, 2013, no customer balance represented a significant portion of the Corporation’s consolidated trade accounts receivable.
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 believes
that its allowance for doubtful accounts is sufficient to cover the related credit risk. The Corporation has credit policies in place and has
established various credit controls, including credit checks, deposits on accounts and advance billing, and has also established procedures
to suspend the availability of services when customers have fully utilized approved credit limits or have violated existing payment terms.
Since the Corporation has a large and diversified clientele dispersed throughout its market areas in Canada, the United States and Europe,
there is no significant concentration of credit risk.