At March 31, 2013, the fair value of the Company's long-term debt, which was measured at its amortized cost of $111.7 million (US$110.0 million), was $115.3 million. The fair value was determined based on prevailing market rates for long-term debt with similar characteristics and risk profile.
4. Employee Future Benefits
The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. At the end of each interim reporting period, the Company estimates movements in its accrued benefit liabilities based upon movements in discount rates and the rates of return on plan assets, as well as any significant changes to the plans. Adjustments are also made for payments made and current service and interest costs.
For the three months ended March 31, 2013, an amount of $0.3 million (before tax) was credited to other comprehensive income. The gain reflects the return on plan assets offset by a slightly lower discount rate used to value the net defined benefit obligation. For the three months ended March 31, 2012, an amount of $2.8 million (before tax) was charged to other comprehensive income.
For the Company's single largest pension plan, a one percentage point increase in the discount rate used in calculating the actuarial estimate of future liabilities would reduce the funded deficit by an estimated $12.8 million.
The assumptions used to estimate the changes in net accrued benefit liabilities were as follows:
---------------------------------------------------------------------------Pension Benefit PlansDiscount rate March 31, 2013 4.10% December 31, 2012 4.20% March 31, 2012 4.80% December 31, 2011 5.00%Rate of return on plan assets 3 months ended March 31, 2013 4.00% 3 months ended March 31, 2012 4.30%---------------------------------------------------------------------------Other Benefit PlansDiscount rate March 31, 2013 4.30% December 31, 2012 4.40% March 31, 2012 5.00% December 31, 2011 5.30%------------------------------------------------------------------------------------------------------------------------------------------------------
5. Financial Instruments
CPPI's cash and cash equivalents, accounts receivable, loans and advances, operating loans, accounts payable and accrued liabilities, and long-term debt are measured at amortized cost subsequent to initial recognition.
Derivative instruments are measured at fair value. IFRS 13, Fair Value Measurement, requires classification of these items within a hierarchy that prioritizes the inputs to fair value measurement.
The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly;
Level 3 - Inputs that are not based on observable market data.
The following table summarizes CPPI's financial instruments at March 31, 2013 and December 31, 2012, and shows the level within the fair value hierarchy in which they have been classified (for financial instruments measured at fair value):
Fair Value As at As at Hierarchy March 31, December 31,(millions of Canadian dollars) Level 2013 2012---------------------------------------------------------------------------Financial assetsHeld for trading Derivative financial instruments Level 2 $ 0.8 $ 0.1Loans and receivables Cash and cash equivalents n/a 16.5 - Accounts receivable (excluding derivatives) n/a 93.3 84.3--------------------------------------------------------------------------- $ 110.6 $ 84.4---------------------------------------------------------------------------Financial liabilitiesHeld for trading Derivative financial instruments Level 2 $ 0.1 $ -Other liabilities Cheques issued in excess of cash on hand n/a - 1.2 Accounts payable and accrued liabilities (excluding derivatives) n/a 104.5 93.4Long-term debt (including current portion) n/a 111.7 109.4--------------------------------------------------------------------------- $ 216.3 $ 204.0------------------------------------------------------------------------------------------------------------------------------------------------------
