Management’s Discussion and Analysis Our Accounting Policies Employee Benefit Plans Our Accounting Policies Critical Accounting Estimates Employee Benefit Plans 78 Bell Canada Enterprises  2004 Annual Report We perform a valuation at least every three years  to determine the actuarial present value of the accrued Our senior management has discussed the develop- ment and selection of the critical accounting estimates described in this section with the audit committee  of the board of directors. The audit committee has reviewed these critical accounting estimates. We consider the estimates described in this section to be an important part of understanding our financial statements because they rely heavily on management’s judgment and are based on factors that are highly uncertain. In August 2001, the manufacturer of the Anik F1 satellite advised Telesat of a gradual decline in power on the satellite. Telesat believes some of the satellite’s core services will be affected by mid-to-late 2005. Anik F1R is expected to replace Anik F1 in time to ensure that service to Anik F1’s customers will not be interrupted. Telesat had insurance in place to cover the power loss on Anik F1 and filed a claim with its insurers in December 2002. In March 2004, Telesat and its insurers reached a final settlement agreement. The settlement calls for an initial payment to Telesat in 2004 of US$136.2 million, which has already been received, and an additional payment of US$49.1 mil- lion in 2007 if the power level on Anik F1 degrades as predicted by the manufacturer. In the event that the power level on Anik F1 is better than predicted, the amount of the payment(s) will be adjusted by applying a formula which is included in the settlement documen- tation and could result in either a pro-rated payment to Telesat of the additional US$49.1 million or a pro-rated repayment of up to a maximum of US$36.1 million to be made by Telesat to the insurers. Currently, power levels are continuing to degrade as predicted. We base our estimates on past experience and on other factors that we believe are reasonable under the circumstances. Because this involves varying degrees of judgment and uncertainty, the amounts currently reported in the financial statements could, in the future, prove to be inaccurate. Under Canadian GAAP, we are required to make esti- mates when we account for and report assets, liabili- ties, revenues and expenses, and to disclose contingent assets and liabilities in our financial statements. We are also required to continually evaluate the estimates that we use. We maintain defined benefit plans that provide pension, other retirement and post- employment benefits for some of our employees. The amounts reported in  the financial statements relating to these benefits are determined using actuarial calculations that are based on several assumptions. We have prepared our consolidated financial state- ments according to Canadian GAAP. See Note 1 to the consolidated financial state- ments for more information about the accounting princi- ples we used to prepare our financial statements. In December 2004, Telesat ceased to insure its interest in the residual value of Nimiq 2 following the arrival in orbit of the leased satellite Nimiq 3 (formerly DirecTV3) a satellite that complements the capacity  of Nimiq 1 and 2 and which, following operational changes, could be used to provide capacity and conti- nuity of service in the event of a failure of either Nimiq 1 or Nimiq 2. • Anik F2 – insured until the third quarter of 2007 for approximately two thirds of its book value. In the event of a total failure of the Anik F2 satellite, the after-tax accounting loss is estimated at $110 million to $115 million. • Nimiq 1 – insured until the second quarter of 2005 for approximately its book value; Telesat currently maintains insurance on in-orbit satellites as follows: This section discusses key estimates and assumptions that management has made under these principles and how they affect the amounts reported in the financial statements and notes. It also describes the key changes in accounting standards and our accounting policies, and how they affect our financial statements. Telesat has signed a contract with EADS Astrium, SAS, a European satellite manufacturer, for construc- tion of the Anik F3 satellite. Anik F3 is expected to be available for service in the second half of 2006. During 2005, subject to insurance availability and market conditions, Telesat will review and, if appropriate, commence the placement of launch and in-orbit insur- ance coverage for Anik F3. However, there is no assur- ance that Telesat will be able to obtain launch and in-orbit insurance coverage for the full value of Anik F3, nor is there any assurance that coverage will be obtained at a favourable premium rate. In December 2004, Telesat received commitments for launch and in-orbit insurance coverage, covering the launch and first year of in-orbit life, for the approx- imate book value of Anik F1R, subject to the comple- tion of documentation. Where insurance coverage is available on commer- cially reasonable terms and conditions, Telesat seeks to protect itself against some of the consequences of launch and in-orbit failures by purchasing satellite insurance. However, there is no assurance that Telesat will be able to obtain or renew launch and in-orbit insurance coverage for its satellites for the full satellite value, nor is there any assurance that coverage will be obtained at a favourable premium rate.