MANAGEMENT’S DISCUSSION AND ANALYSIS We used a combination of value-in-use and fair-value-less-costs-to-sell methodologies with pre-tax discount rates of approximately 10 % in arriving at the impairment amount in 2012. The recoverable amounts of the cash generating units declined in 2012 mainly because advertising revenue was lower in certain markets. Interest on long-term debt was higher in 2013, the net effect of an increase in the amount of outstanding debt, partially offset by a decrease in the weighted average interest rate on our outstanding debt, mainly related to refinancing activities completed in 2013. See “Managing Our Liquidity and Financial Resources” for more information. In 2013, the foreign exchange loss of $23 million primarily relates to the depreciation in the Canadian dollar relative to the US dollar and its impact on our US$350 million of senior notes due 2038, which was not hedged for accounting purposes prior to March 6, 2013. Most of the foreign exchange loss was offset by the change in the fair value of the associated Debt Derivatives as discussed below. We use cross currency interest rate exchange agreements (Debt Derivatives) to hedge the foreign exchange risk on all of our US$ denominated senior notes and debentures. The non-cash gain on the fair value of derivative instruments in 2013 was primarily from the change in fair value of the Debt Derivatives prior to March 6, 2013. Subsequently, all Debt Derivatives were designated as hedges for accounting purposes. Other income was lower this year, largely due to a $233 million gain recorded in 2012 related to the sale of spectrum licenses by Inukshuk, a 50 % owned joint venture, to the other non-related venture. Other income of $81 million this year mainly reflects a $47 million gain from the sale of TVtropolis and certain other investment income. Our effective income tax rate was 26.3 % for 2013 and 26.4 % for 2012. As discussed in the Cable segment, the second quarter of 2012 was the last period of operations for our Video business, from which point the associated results were treated as discontinued operations for accounting and reporting purposes. The table below shows the difference between income tax expense from continuing operations, and income tax expense computed by applying the statutory income tax rate to income before income taxes: While the elimination of the partnership deferral affects the timing of cash tax payments, it does not impact our income tax expense for accounting purposes. We paid $116 million more in cash income taxes in 2013 than in 2012, mainly because we used substantially all of our remaining non-capital income tax loss carryforwards in 2012. In 2011, legislative changes eliminated the deferral of partnership income, accelerating the payment of approximately $700 million of previously deferred cash taxes over a five year amortization period, beginning in 2012 at 15 % ,20 % in each of 2013 through 2015, and 25 % in 2016. Our cash tax payments for the 2014 to 2016 taxation years will include these additional amounts. The 2013 and 2012 effective income tax rates were consistent with the statutory income tax rates. For both years, this is the net effect of several offsetting adjustments to our income tax expense. The most significant adjustments were: GLYPH<129> realizing capital gains (of which only 50 % are taxable) GLYPH<129> recognizing and using losses and other tax attributes that were not previously recognized GLYPH<129> offset by a tax charge relating to the revaluation of our net deferred tax liability to reflect an increase in tax rates and non-deductible stock-based compensation. Finance Costs Other Income Income Taxes Discontinued Operations Years ended December 31 (In millions of dollars) 2013 2012 % Chg Interest on long-term debt $ 734 $ 691 6 Interest on pension liability 14 7 100 Foreign exchange (gain) loss 23 (9) n/m Change in fair value of derivative instruments (16) 1 n/m Capitalized interest (25) (28) (11) Other 12 9 33 Total finance costs $ 742 $ 671 11 Years ended December 31 (In millions of dollars, except tax rate) 2013 2012 Statutory income tax rate 26.5 % 26.4 % Income before income taxes $ 2,265 $ 2,345 Computed income tax expense using statutory income tax rate 600 619 Revaluation of deferred tax balances due to legislative changes 8 54 Non-taxable portion of capital gains (9) (61) Recognition of previously unrecognized deferred tax assets (14) (22) Impairment of goodwill and intangible assets – 11 Non-deductible stock-based compensation 8 9 Other items 3 10 Income tax expense $ 596 $ 620 Effective income tax rate 26.3 % 26.4 % Cash income taxes paid $ 496 $ 380 52 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT