Air Canada 2007 Annual Report Download - page 92

2007 Air Canada Annual Report
92
N) FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at rates of exchange
in effect at the date of the consolidated statement of fi nancial position. Non-monetary assets, non-monetary liabilities,
revenues and expenses arising from transactions denominated in foreign currencies, are translated at rates of exchange in
effect, which are based on averages for the month. Adjustments to the Canadian dollar equivalent of foreign denominated
monetary assets and liabilities due to the impact of exchange rate changes are classifi ed on the consolidated statement of
operations as a foreign exchange gain or loss.
O) INCOME TAXES
The Corporation utilizes the liability method of accounting for income taxes under which future income tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the fi nancial
statement carrying amount and the tax basis of assets and liabilities. Future income tax assets and liabilities are measured
using substantively enacted tax rates in effect for the year in which those temporary differences are expected to be recovered
or settled. The effect on future income tax assets and liabilities of a change in tax rates is recognized in earnings in the
period when the change is substantively enacted. Future income tax assets are recognized to the extent that realization is
considered more likely than not. The benefi t of future income tax assets that existed at fresh start, and for which a valuation
allowance is recorded, will be recognized fi rst to reduce to nil any remaining intangible assets (on a pro-rata basis) that were
recorded upon fresh start reporting with any remaining amount as a credit to shareholders’ equity. The benefi t of future
income tax assets that arise after fresh start will be recognized in the income statement.
As the income of excluded inter-company investments held by Air Canada (Note 3) has been excluded from these
consolidated fi nancial statements, the future income tax expense resulting from the utilization of the losses accumulated
prior to the date of the Air Canada IPO has been allocated to Shareholders’ Equity.
P) CASH AND CASH EQUIVALENTS
Cash includes $411 pertaining to investments with original maturities of three months or less at December 31, 2007
(2006 - $1,330). Investments include bankers’ acceptances, bankers discount notes, and commercial paper, which may be
liquidated promptly and have original maturities of three months or less. The weighted average interest rate on investments
as at December 31, 2007 is 4.68 % (2006 - 4.31%). Refer to Note 7 for a discussion of non-bank sponsored Asset-Backed
Commercial Paper (“ABCP”) reclassifi ed to Deposits and other assets as it is not expected that these amounts are collectible
within one year.
Q) SHORT-TERM INVESTMENTS
Short-term investments, comprised of bankers’ acceptances and bankers’ discount notes, have original maturities over three
months, but not more than one year. The weighted average interest rate on short-term investments as at December 31, 2007
is 4.61% (2006 - 4.38%).
R) RESTRICTED CASH
The Corporation has recorded $124 (2006 - $109) in restricted cash, under current assets, representing funds held in trust
by Air Canada Vacations in accordance with regulatory requirements governing advance ticket sales, recorded under current
liabilities, for certain travel related activities.
Restricted cash with maturities greater than one year from the balance sheet date is recorded in Deposits and other
assets.
S) SPARE PARTS, MATERIALS AND SUPPLIES
Spare parts, materials and supplies includes repairable and expendable spare parts and fuel inventories and are valued at the
lower of average cost and net realizable value.