42 HYDRO ONE ANNUAL REPORT 2013 MANAGEMENT’S DISCUSSION AND ANALYSIS  Further, based on differences between long-term Government of Canada nominal bonds and real return bonds, the implied inflation rate has  decreased from 1.9% per annum as at December 31, 2012 to approximately 1.2% per annum as at December 31, 2013. Given the Bank of Canada’s commitment to keep long-term inflation between 1.00% and 3.00%, management believes that the current implied rate  is reasonable to use as a long-term assumption and as such, has used a 2.0% per annum inflation rate for liability valuation purposes as at  December 31, 2013. Our pension and post-retirement and post-employment obligations are also impacted by changes in life expectancies used in mortality  assumptions. Increases in life expectancies of plan members result in increases in pension and post-retirement and post-employment benefit obligations. The costs of post-retirement and post-employment benefits are determined at the beginning of the year. The costs are based on assumptions for  expected claims experience and future health care cost inflation. A 1% increase in the health care cost trends would result in an increase in  service cost and interest cost of approximately $21 million per year and an increase in the year-end obligation of about $258 million. Employee future benefits are included in labour costs that are either charged to results of operations or capitalized as part of the cost of  property, plant and equipment and intangible assets. Changes in assumptions will affect the accrued benefit obligation of the employee future  benefits and the future years’ amounts that will be charged to our results of operations or capitalized as part of the cost of property, plant and  equipment and intangible assets. Within our regulated businesses, the carrying costs of most of our long-lived assets are included in rate base where they earn an OEB-approved  rate of return. Asset carrying values and the related return are recovered through approved rates. As a result, such assets are only tested for  impairment in the event that the OEB disallows recovery, in whole or in part, or if such a disallowance is judged to be probable. We regularly  monitor the assets of our unregulated Hydro One Telecom subsidiary for indications of impairment. As at December 31, 2013, no asset  impairment had been recorded for assets within our regulated or unregulated businesses.  Asset Impairment DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING Goodwill represents the cost of acquired LDCs that is in excess of the fair value of the net identifiable assets acquired at the acquisition date.  Goodwill is evaluated for impairment on an annual basis, or more frequently if circumstances require. We have concluded that goodwill was  not impaired at December 31, 2013. To optimize our customer service operations, we implemented the CIS module of SAP. This new system replaced multiple legacy applications  which provided service to our distribution customers and key constituents for billing, customer contacts, field services, settlements, and customer  choice administration. Internal controls have been documented and tested for adequacy and effectiveness, and continue to be refined. In compliance with the requirements of National Instrument 52-109, our Certifying Officers have reviewed and certified the Consolidated  Financial Statements for the year ended December 31, 2013, together with other financial information included in our securities filings. Our  Certifying Officers have also certified that disclosure controls and procedures (DC&P) have been designed to provide reasonable assurance  that material information relating to our company is made known within our company. Further, our Certifying Officers have certified that internal  controls over financial reporting (ICFR) have been designed to provide reasonable assurance regarding the reliability of financial reporting and  the preparation of the Consolidated Financial Statements. Based on the evaluation of the design and operating effectiveness of our company’s  DC&P and ICFR, our Certifying Officers concluded that our company’s DC&P and ICFR were effective as at December 31, 2013.