page 121 Bombardier Inc. Annual Report 2003-04 NOTE 22. FINANCIAL INSTRUMENTS (CONT ’ D) The fair values of financial instruments have been established as follows: Cash and cash equivalents, receivables, short-term borrowings and accounts payable and accrued liabilities: the carrying amounts reported on the consolidated balance sheets approximate the fair values of these items due to their short-term nature. Finance receivables: the fair values of variable-rate finance receivables that reprice frequently and have no significant change in credit risk, approximate the carrying values. The fair values of fixed-rate finance receivables are estimated using discounted cash flow analyses, using interest rates offered for finance receivables with similar terms as those of borrowers of similar credit quality. Loans and investments: the fair values of loans and investments are estimated using public quotations, when available, or discounted cash flow analyses, using interest rates applicable for assets with similar terms. The carrying amounts reported on the consolidated balance sheets approximate their fair values. Long-term debt: the fair values of long-term debt are estimated using public quotations or discounted cash flow analyses, based on current corresponding borrowing rates for similar types of borrowing arrangements. Derivative financial instruments: the fair values generally reflect the estimated amounts that the Corporation would receive upon the settlement of favourable contracts or be required to pay to terminate unfavourable contracts at the reporting dates. Investment dealers’ quotes from the Corporation’s bankers are available for substantially all of the Corporation’s forward foreign exchange contracts, interest-rate and cross- currency swap agreements and interest-rate cap agreements. The fair value of financial instruments for which the carrying amount reported is different from the fair value was as follows as at  January 31: In addition to the credit risk described elsewhere in these Consolidated Financial Statements, the Corporation is subject to risk related to the off-balance sheet nature of derivative financial instruments, whereby counter-party failure would result in economic losses on favourable contracts. However, the counter-parties to these derivative financial instruments are investment grade financial institutions that the Corporation anticipates will satisfy their obligations under the contracts. The Corporation considers that its credit risk associated with its receivables did not represent a significant concentration of credit risk at January 31, 2004, due to the large number of customers and their dispersion across many geographic areas. $^{(1)}$Includes interest-rate and cross-currency interest-rate swap agreements. Credit risk 2004 2003 CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE Bombardier Long-term debt $2,781 $2,863 $3,099 $2,759 Derivative financial instruments: Favourable Forwards – 235 – 349 Interest-rate cap 28 29 – – Unfavourable Forwards – (144) – (172) Swaps (1) – (25) – (31) BC Finance receivables 4,148 4,162 7,013 7,054 Long-term debt 5,293 5,452 5,827 5,560 Derivative financial instruments: Favourable Swaps (1) 297 408 114 282 Unfavourable Swaps (1) – (14) – (47)