• any forward premiums or discounts on forward foreign exchange contracts that are used to hedge long-term debt denominated in foreign currencies are amortized as an adjustment to interest expense over the term of the forward contract. 

The following describes our policies for specific kinds of derivatives. 

## Interest Rate Swap Agreements 

We use interest rate swap agreements to help man- age the fixed and floating interest rate mix of our total debt portfolio. These agreements often involve exchanging interest payments without exchanging the notional principal amount that the payments are based on. We record the exchange of payments as an adjust- ment of interest expense on the hedged debt. We include the related amount payable or receivable from counterparties in Other long-term assets or liabilities . 

## Foreign Currency Swap Agreements 

We use foreign currency swap agreements to manage the foreign exchange rate exposure of some of our debt that is denominated in foreign currencies. We designate these agreements as hedges of firm commitments to pay interest and/or principal on the foreign currency risk. We recognize gains and losses on these contracts the same way we recognize the gains and losses on the hedged item. Unrealized gains or losses are included in Other long-term assets or liabilities . 

## Forward Contracts 

We use forward contracts to manage: 

• designated in foreign currencies. We designate these agreements as hedges of firm commitments to pay the principal in the foreign currency. 

• the exposure to anticipated forecasted transactions denominated in foreign currencies. We designate these agreements as hedges of future cash flows. 

• changes in the price of BCE Inc. common shares relating to SCPs. 

We recognize gains and losses on these contracts the same way we recognize the gains and losses on the hedged item. Unrealized gains or losses are included in Other long-term assets or liabilities . 

## Employee Benefit Plans 

## (i) Defined Benefit Plans 

We maintain defined benefit (DB) plans that provide pension benefits for some of our employees. Benefits are based on the employee’s length of service and aver- age rate of pay during his or her last five years of service. Most employees are not required to contribute to the plans. The plans provide increasing pension benefits to help protect a portion of the income of retired employees against inflation. 

We are responsible for adequately funding our DB pension plans. We make contributions to them based on various actuarial cost methods that are permitted by pension regulatory bodies. Contributions reflect actuarial assumptions about future investment returns, salary projections and future service benefits. 

We also provide other future benefits to some of our employees, including: 

• health-care and life insurance benefits during retirement 

• other post-employment benefits, including various disability plans, workers’ compensation and medical benefits to former or inactive employees, their benefi- ciaries and dependants, from the time their employ- ment ends until their retirement starts, under certain circumstances. 

We do not fund the other employee future benefit plans. 

We accrue our obligations and related costs under employee benefit plans, net of the fair value of plan assets. Pension and other retirement benefit costs are determined using: 

• the projected benefit method, prorated on years of service, which takes into account future pay levels 

• a discount rate based on market interest rates of high-quality bonds with maturities that match the timing and benefits expected to be paid by the plans 

• management’s best estimate of the plans’ expected investment performance, pay increases, retirement ages of employees and expected health-care costs. 

We value pension plan assets at fair value, which is determined using current market values. We use a market-related value to calculate the expected return on plan assets. This value is based on a four-year weighted average of the fair value of the pension plan assets. 

