Air Canada 2008 Annual Report Download - page 102

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2008 Air Canada Annual Report
102
are amortized over 3 to 5 years. Betterments to owned aircraft are capitalized and amortized over the remaining service life
of the aircraft. Betterments to aircraft on operating leases are amortized over the term of the lease.
Buildings are depreciated over their useful lives not exceeding 40 to 50 years on a straight line basis. An exception to this
is where the useful life of the building is greater than the term of the land lease. In these circumstances, the building is
depreciated over the life of the lease. Leasehold improvements are amortized over the lesser of the lease term or 5 years.
Ground and other equipment is depreciated over 3 to 25 years.
T) INTEREST CAPITALIZED
Interest on funds used to finance the acquisition of new flight equipment and other property and equipment is capitalized
for periods preceding the dates that the assets are available for service. Capitalized interest related to the acquisition of new
flight equipment and other property and equipment is included in purchase deposits within Property and equipment (Note
3). Capitalized interest also includes financing costs charged by the manufacturer on capital commitments as described in
Note 14.
U) INTANGIBLE ASSETS
As a result of the application of fresh start reporting, intangible assets were recorded at their estimated fair values at September
30, 2004. For periods subsequent to September 30, 2004, intangible assets are initially recorded at cost. Indefinite life assets
are not amortized while assets with finite lives are amortized on a straight line basis to nil over their estimated useful lives.
Estimated
Useful Life
International route rights and slots Indefinite
Air Canada trade name Indefinite
Other marketing based trade names Indefinite
Star Alliance membership 25 years
Other contract and customer based intangible assets 10 to 15 years
Technology based intangible assets 1 to 5 years
V) IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are tested for impairment whenever circumstances indicate that the carrying value may not be recoverable.
When events or circumstances indicate that the carrying amount of long-lived assets, other than indefinite life intangibles,
are not recoverable, the long-lived assets are tested for impairment by comparing the estimate of future expected cash
flows to the carrying amount of the assets or groups of assets. If the carrying value is not recoverable from future expected
cash flows, any loss is measured as the amount by which the asset’s carrying value exceeds fair value and recorded in the
period. Recoverability is assessed relative to undiscounted cash flows from the direct use and disposition of the asset or
group of assets.
Indefinite life intangible assets are subjected to impairment tests on an annual basis or when events or circumstances
indicate a potential impairment. If the carrying value of such assets exceeds the fair values, the assets are written down to
fair value.
W) AIRCRAFT LEASE PAYMENTS IN EXCESS OF OR LESS THAN RENT EXPENSE
Total aircraft operating lease rentals over the lease term are amortized to operating expense on a straight line basis.
Included in Deposits and other assets and Other long-term liabilities are the differences between the straight line aircraft
rent expense and the payments as stipulated under the lease agreement.