Air Canada 2009 Annual Report Download - page 133

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Consolidated Financial Statements and Notes
133
The following information summarizes the fi nancial statement impact of fuel derivatives:
For the year ended December 31
(Canadian dollars in millions except per share fi gures) 2009 2008
Consolidated Statement of Operations
Operating expenses
Aircraft fuel Realized effective gain (loss) on
derivatives designated under
hedge accounting $ (419)
$ 79
Non-operating income (expense)
Gain (loss) on fi nancial instruments
recorded at fair value
Ineffective gain (loss) on derivatives
designated under hedge accounting
Fair market value gain (loss) on
economic hedges
$ -
$ 102
$ 83
$ (9)
Consolidated Statement of Comprehensive Income (Loss)
Effective gain (loss) on derivatives designated
under hedge accounting
Tax expense on effective gain
Reclassifi cation of net realized (gain) loss
on fuel derivatives designated under hedge
accounting to Aircraft fuel expense
Tax on reclassifi cation
$ (1)
$ -
$ 419
$ 4
$ (605)
$ -
$ (79)
$ 22
As at December 31
(Canadian dollars in millions) 2009 2008
Consolidated Statement of Financial Position
Current assets Collateral deposits for fuel derivatives $ 43 $ 328
Current liabilities* Fair market value of fuel derivatives
designated under hedge accounting
Fair market value of fuel derivatives
economic hedges
n/a
$ (31)
$ (405)
$ (15)
Shareholders’ equity (AOCL) Net loss from fuel derivatives
designated under hedge accounting
(net of tax of 2009 - $1 and 2008 - $5)
$ (184)
$ (606)
* The balance is refl ected within Current liabilities on the Consolidated Statement of Financial Position due to the counterparty’s ability to terminate the derivatives at fair
value at any time prior to maturity.
Financial Instrument Fair Values in the Consolidated Statement of Financial Position
The carrying amounts reported in the Consolidated Statement of Financial Position for short term fi nancial assets and
liabilities, which includes Accounts receivable and Accounts payable, approximate fair values due to the immediate or short-
term maturities of these fi nancial instruments. Cash equivalents, Short-term investments, and Collateral deposits for fuel
derivatives are classifi ed as held for trading and therefore are recorded at fair value.
The carrying amounts of interest rate swaps, foreign exchange, and fuel derivatives are equal to fair value, which is based
on the amount at which they could be settled based on estimated current market rates.
Management estimated the fair value of its long-term debt based on valuation techniques taking into account market rates
of interest, the current tightness in credit markets and current estimated credit margins applicable to the Corporation based
on recent transactions. The current low market rates of interest partially offset any increase in credit margins observed in
recent transactions. The estimated fair value of debt is approximately $4,200 as compared to its carrying value of $4,522,
refl ecting primarily the declines in fair values of aircraft fi nancings completed in prior years.