of Expenditure Derivatives in the year ended December 31, 2013 for
Cdn $430 million and the Expenditure Derivatives remaining at
December 31, 2013 have terms to maturity ranging from January 2014
to December 2014. All of our currently outstanding Expenditure
Derivatives have been designated as effective hedges against foreign
exchange risk for accounting purposes.
Equity Derivatives
We use stock-based compensation derivatives (Equity Derivatives) to
hedge the market price appreciation risk of the RCI Class B shares
granted under our stock-based compensation programs. We use Equity
Derivatives for risk-management purposes only.
In 2013, we entered into Equity Derivatives to offset the price
appreciation risk associated with 5.7 million RCI Class B Non-Voting
shares that were granted under our stock-based compensation
programs for stock options, RSUs and DSUs (see note 24). The Equity
Derivatives were entered into at a weighted average price of $50.37
with original terms to maturity of one year, extendible for further one
year periods with the consent of the hedge counterparties. The Equity
Derivatives have not been designated as hedges for accounting
purposes. We record changes in their fair value as stock-based
compensation expense, offsetting a portion of the impact of changes in
the market price of RCI Class B Non-Voting shares contained in the
recorded amount of the stock-based compensation liability for stock
options, RSUs and DSUs.
Fair Values
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 market values from similar transactions or well
established market, asset based or projected income valuation
techniques. 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 trading values. We determine the fair values of our Debt
Derivatives and Expenditure Derivatives (Derivatives) using an estimated
credit-adjusted mark-to-market valuation by discounting cash flows to
the measurement date. In the case of 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 Derivatives in a liability position, our credit
spread is added to the risk-free discount rate for each derivative.
116 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT