ANNUAL REPORT 2008/09 - BC Transit

BRITISH COLUMBIA TRANSITNotes to Financial StatementsYear ended March 31, 2009 ($000)Credit Risk:Credit risk is the risk that one party to a financial instrument will cause a financial loss for theother party by failing to discharge an obligation. A substantial portion of BC Transit’saccounts receivable are with government entities, either Federal, Provincial or from municipalgovernment partners. The maximum credit risk exposure is the total carrying value ofaccounts receivable. BC Transit monitors the creditworthiness and concentration of credit.Cash and cash equivalents and debt sinking funds are held only at major financialinstitutions.Liquidity Risk:Liquidity risk is the risk that BC Transit will encounter difficulty in meeting obligationsassociated with financial liabilities as they come due. BC Transit manages liquidity riskthrough its cash, debt, sinking fund and funding management initiatives. Accounts payableand accrued liabilities are due in the next fiscal year. Maturity of long term debt is disclosedin note 8. Other commitments with future minimum payments are disclosed in note 15.14. Capital DisclosuresBC Transit defines capital as net assets plus deferred capital contributions. BC Transit receivesthe majority of these operating and capital funds from the Province and municipal partners.BC Transit’s objective when managing capital is to meet its current Service Plan initiatives withthe current funding available. BC Transit manages its capital structure in conjunction with theProvince and makes adjustments to its Service Plan and related budgets based on availablegovernment funding. The focus is to ensure that service levels are preserved within the fundingrestrictions by the Province and municipal partners.BC Transit is not subject to debt covenants or other restrictions with respect to operating funding.Funding received for designated purposes must be used for the purpose outlined by the fundingparty. BC Transit has complied with the external restrictions on any external funding provided.15. Related Party TransactionsAs a Crown Corporation of the Province, BC Transit and the Province are considered relatedparties. All transactions between BC Transit and the Province are considered to possesscommercial substance and are consequently recorded at the exchange amount, which is theamount of consideration established and agreed to by the related parties. Related partytransactions and balances have been disclosed elsewhere in the financial statements.2153BC TRANSIT 2008/09 ANNUAL REPORT