Air Canada 2008 Annual Report Download - page 103

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Consolidated Financial Statements and Notes
103
X) ASSET RETIREMENT OBLIGATIONS
The Corporation records an asset and related liability for the costs associated with the retirement of long-lived tangible
assets when a legal liability to retire such assets exists. The fair value of a liability for an asset retirement obligation is
recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the long-lived asset and then amortized over its estimated
useful life. In subsequent periods, the asset retirement obligation is adjusted for the passage of time through charges to
income and any changes in the amount of the underlying cash flows through increases or decreases to the asset retirement
obligation and related asset. A gain or loss may be incurred upon settlement of the liability.
Y) RELATED PARTY TRANSACTIONS
Related party transactions not in the normal course of operations are measured at the exchange amount when the change
in ownership interest in the item transferred is substantive and the exchange amount is supported by independent evidence;
otherwise it is recorded at the carrying amount. Related party transactions in the normal course of operations are measured
at the exchange amount.
Z) VARIABLE INTEREST ENTITIES
Aircraft Leasing Transactions
The Corporation has aircraft leasing transactions with a number of special purpose entities that are variable interest
entities (a “VIE”) under Accounting Guideline 15 of the CICA Handbook, Variable Interest Entities (“AcG-15”). As a result
of the Corporation being the primary beneficiary of these VIEs, the Corporation consolidates leasing entities covering 44
aircraft.
Fuel Facilities Arrangements
The Corporation participates in fuel facilities arrangements operated through fuel facility corporations (the “Fuel Facility
Corporations”), along with other airlines to contract for fuel services at various major Canadian airports. The Fuel Facility
Corporations are organizations incorporated under federal or provincial business corporations acts in order to acquire,
finance and lease assets used in connection with the fuelling of aircraft and ground support equipment. The Fuel Facilities
Corporations operate on a cost recovery basis.
Under AcG-15, the Corporation is the primary beneficiary of three of the Fuel Facility Corporations in Canada. Five of
the Fuel Facility Corporations in which Air Canada participates in Canada that have not been consolidated have assets of
approximately $150 and debt of approximately $127, which is the Corporation’s maximum exposure to loss without taking
into consideration any cost sharing and asset retirement obligations that would occur amongst the other contracting
airlines. The Corporation considers this loss potential as remote.
AA) FUTURE ACCOUNTING STANDARD CHANGES
The following is an overview of accounting standard changes that the Corporation will be required to adopt in future years:
GoodwillandIntangibleAssets
In February 2008, the Canadian Institute of Charted Accountants (“CICA”) issued section 3064, Goodwill and Intangible
Assets which provides guidance on the recognition, measurement, presentation and disclosure for goodwill and intangible
assets, other than the initial recognition of goodwill or intangible assets acquired in a business combination. The standard is
effective for fiscal years beginning on or after October 1, 2008, and requires retroactive application to prior period financial
statements. The Corporation has evaluated the impact of this new standard for adoption on January 1, 2009 and does not
expect any significant impact on its consolidated financial statements.
BusinessCombinations,ConsolidatedFinancialStatementsandNon-controllingInterests
The CICA issued three new accounting standards in January 2009: section 1582, Business Combinations, section 1601, Consolidated
Financial Statements, and section 1602, Non-controlling Interests. These new standards will be effective for fiscal years beginning on
or after January 1, 2011. The Corporation is in the process of evaluating the requirements of the new standards.