58 Orbit G arant 2012 annual rep O rt N OTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) For the years ended June 30, 2012 and 2011 (in thousands of Canadian dollars, except for earnings per share and option data) The allowance for doubtful accounts is established based on Company’s best estimate on the recovery of balances for which coll ection may be uncertain. Uncertainty of collection may become apparent from various indicators, such as a deterioration of the credi t situation of a given client or delay in collection when the aging of invoices exceeds the normal payment terms. Management regularly reviews accounts receivable and assesses the appropriateness of the allowance for doubtful accounts. The change in the allowance for doubtful accounts is detailed below: June 30 June 30 2012 2011 $ $ Balance at beginning of year 734 1,070 Change in allowance, other than write-offs and recoveries 315 5 Write-offs or trade receivables (733) — Recoveries (8) (341) Balance at end of year 308 734 As at June 30, 2012, 43% (June 30, 2011: 43% and July 1, 2010: 54.9%) of the trade accounts receivable are aged as current and 1% are impaired (June 30, 2011: 2% and July 1, 2010: 5%). Two major customers represent 34% of the trade accounts receivable as at June 30, 2012 (June 30, 2011, one major customer represents 13% and on July 1, 2010, one customer represented 10% of these accounts). One major customer represents 15% of the contract revenue for the year ended June 30, 2012 (year ended June 30, 2011, no major customer represents 10%). Credit risk also arises from cash and cash equivalents with banks and fnancial institutions. This risk is limited because the c ounterparties are mainly Canadian banks with high credit ratings. The Company does not enter into derivatives to manage credit risk. Interest rate risk The Company is subject to interest rate risk since a signifcant part of the long-term debt bears interest at variable rates. As at June 30, 2012, the Company has estimated that a 1% point increase or decrease in interest rates would have caused a corresponding annual increase or decrease in net earnings of approximately $187 (June 30, 2011, $105: no signifcant impact on July 1, 2010). Fair value The fair value of cash, accounts receivable, bank overdraft and accounts payable and accrued liabilities is approximately equal to their carrying values due to their short-term maturity. The fair value of long-term debt approximates its carrying value as it bears interest at a variable rate and has fnancing condi tions similar to those currently available to the Company. The fair value on the contingent consideration has been evaluated as of a disc ounted rate value. Fair value hierarchy The methodology used to measure the Company’s fnancial instruments accounted for at fair value is determined based on the foll owing hierarchy: Level Basis for determination of fair value Level 1 Quoted prices in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability; Level 3 Inputs for the asset or liability that are not based on observable market data. The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A fnancial instrument is clas sifed to the lowest level of the hierarchy for which a signifcant input has been considered in measuring fair value. As at June 30, 2012 and 2011, the contingent considerations, the only fnancial instruments at fair value, are classifed as a L evel 3 fnancial instrument as the fair value is determined using a discounted rate value. There is no observable inputs for that fnanc ial instrument.