Air Canada 2009 Annual Report Download - page 66

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2009 Air Canada Annual Report
66
Employee future benefi ts
Current accounting policy
The cost of pensions, other post-retirement and post-employment benefi ts earned by employees is actuarially determined
annually as at December 31. The cost is determined using the projected benefi t method prorated on service, market interest
rates, and management’s best estimate of expected plan investment performance, salary escalation, retirement ages of
employees and 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 four years.
Past service costs arising from plan amendments are amortized on a straight-line basis over the expected average
remaining service period of employees active at the date of amendment. This period does not exceed the expected average
remaining service period of such employees up to the full eligibility date. The expected average remaining service period of
active employees (or expected average remaining life expectancy of retired members for a plan with no active members)
is between 7 and 16 years for pension plans and between 10 and 11 years for post retirement and post employment
benefi t plans.
Cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the projected benefi t obligation
or market-related value of plan assets at the beginning of the year are amortized over the expected remaining service life
of active employees.
Expected IFRS accounting policy
Defi ned benefi t plans
Actuarial gains and losses
Under IAS 19 Employee benefi ts (“IAS19”), actuarial gains and losses may either be:
• Deferred up to a maximum, with any excess amortised in profi t or loss (the ‘corridor approach’),
• Recognised immediately in profi t or loss, or
• Recognised immediately in other comprehensive income without subsequent recycling to income.
Under the corridor approach under IAS 19, cumulative actuarial gains and losses in excess of 10% of the greater of the
obligation and the fair value of plan assets at the beginning of the period are amortized in profi t or loss over the average
remaining working lives of the employees. Under current Canadian GAAP, the corridor approach is used and cumulative
actuarial gains and losses in excess of 10% of the greater of the obligation and market-related value of plan assets at the
beginning of the period is amortized in profi t or loss.
The Corporation has not fi nalized its decision with respect to the accounting for actuarial gains and losses.
Fair value of plan assets vs market-related value of plan assets
Under IAS 19, a market-related valuation method can not be used to value plan assets. Under current Canadian GAAP, a
market-related value of assets whereby the difference between actual and expected return is gradually recognized over four
years is used.
The Corporation will use the fair value of plan assets under IAS 19.