Air Canada 2006 Annual Report Download - page 80

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sales. Revenue related to these passenger tickets is recorded in passenger revenues when transportation is
provided.
For Aeroplan Miles earned by Air Canada customers, Air Canada purchases Miles from Aeroplan in accordance
with the terms of the CPSA. The cost of purchasing Aeroplan Miles from Aeroplan is accounted for as a sales
incentive and charged against passenger revenues when the points are issued, which is upon the qualifying air
travel being provided to the customer.
Under the CPSA, for a specified number of Aeroplan Miles issued prior to January 1, 2002, the Corporation is
responsible for providing air travel rewards at no charge to Aeroplan. Upon implementation of the Corporation’s
plan of arrangement under the Companies’ Creditors Arrangement Act (the “Plan”), this obligation was recorded
at the estimated fair value of air travel rewards expected to be issued to the Aeroplan members (Note 20). On
redemption of these Aeroplan Miles, a proportion of the liability is transferred to Advance ticket sales with
revenue recorded in passenger revenues when the transportation is provided.
G) OTHER REVENUES
Other revenue includes revenues from the sale of the ground portion of vacation packages, ground handling
services and other airline related services, including maintenance services provided by Jazz. Vacation package
revenue is recognized as services are provided over the period of the vacation. Other airline related service
revenues are recognized as the products are sold to passengers or the services are provided.
The Corporation provides certain services to related parties consisting principally of administrative services in
relation to information technology, human resources, finance and accounting, treasury and tax services,
corporate real estate, environmental affairs and legal services. Administrative service revenues are recognized
as services are provided. Real estate rental revenues are recognized on a straight line basis over the term of
the lease.
H) EMPLOYEE FUTURE BENEFITS
The cost of pensions, other post-retirement and post-employment benefits earned by employees is actuarially
determined using the projected benefit method prorated on service, market interest rates, and management's
best estimate of expected plan investment performance, salary escalation, retirement ages of employees and
expected health care costs.
A market-related valuation method is used to value plan assets for the purpose of calculating the expected
return on plan assets. Under the selected method, the differences between investment returns during a given
year and the expected investment returns are amortized on a straight line basis over 4 years.
Past service costs arising from plan amendments are amortized on a straight-line basis over the average
remaining service period of employees active at the date of amendment. This period does not exceed the
average remaining service period of such employees up to the full eligibility date. The average remaining
service life for the plans is between 7 and 17 years.
Cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the projected benefit
obligation or market-related value of plan assets at the beginning of the year are amortized over the remaining
service period of active employees.
As described in Note 9, some of the Corporation's employees perform work for ACE, and some are
contractually assigned to various subsidiary companies of ACE. These employees are members of the
Corporation's sponsored defined benefit pension plans and also participate in the Corporation's sponsored
health, life and disability future benefit plans. These combined consolidated financial statements include all of
the assets and liabilities of all sponsored plans of the Corporation. Pension expenses are recorded net of costs
recovered from related parties pertaining to employees assigned by the Corporation to the related parties based
on an agreed upon formula. The cost recovery reduces the Corporation's benefit cost with an offset to inter-
company receivable.
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