21 NORTHERN COLLEGE OF APPLIED ARTS AND TECHNOLOGY Notes to Financial Statements Years ended March 31, 2013 and March 31, 2012 18. Financial instruments: (a) Credit risk: Credit risk refers to the risk that a counterpar ty may default on its contractual obligations resulting in a financial loss. The College is exposed to this risk relating to its cash and accounts receivable. The College holds it s cash accounts with federally regulated chartered banks who are insured by the Canadi an Deposit Insurance Corporation. In the event of default, the College’s cash acc ounts are insured up $300,000 (2012 - $300,000). The College’s investment policy operates with in the constraints of the investment guidelines issued by the MTCU and puts lim its on the bond portfolio including portfolio composition limits, issuer type limits, bond quality limits, aggregate issuer limits, corporate sector limits and general guidelines for geographic exposure. All fixed income portfolios are measured for performance on a quarterly basis and monitored by management on a monthly basis. The guidelines permit the College’s funds to be invested in bonds issued by the Governm ent of Canada, a Canadian province or a Canadian municipality having a rating of A or better, or corporate investments having a rating of A (R-1) or better. Included in accounts receivable of $1,213,927 ar e student receivables in the amount of $641,438 of which 19% is past due. An amount of $331,105 has been provided for an impairment allowance on the total accounts receivable balance. (b) Market risk: Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of market factors. Market factors include three types of risk: currency risk, interest rate risk and equity risk. The College’s investment policy operates with in the constraints of the investment guidelines issued by the MTCU. The polic y’s application is monitored by management, the investment managers and the board of gover nors. Diversification techniques are utilized to minimize risk. (c) Interest rate risk: Interest rate risk is the potential for financial loss caused by fluctuations in fair value or future cash flows of financial instruments bec ause of changes in market interest rates. The College is exposed to this risk thr ough its interest bearing investments. The College’s bond portfolio has interest rates ranging from 1.45% to 2.35% with maturities ranging from May 6, 2013 to January 28, 2015. At March 31, 2013, a 1% fluctuation in inte rest rates, with all other variables held constant, would have an estimated impact on the fair value of bonds of $39,704.