Air Canada 2009 Annual Report Download - page 95

Consolidated Financial Statements and Notes
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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.
As described in Note 8, certain Corporation employees perform work for ACE and Aveos and are members of Corporation-
sponsored defi ned benefi t pension plans and also participate in Corporation-sponsored health, life and disability benefi t
plans. Other Corporation employees performed work for Aeroplan until the date of transition to employment at Aeroplan and
then ceased to accrue benefi ts under the Corporation-sponsored defi ned benefi t pension plans and under the Corporation-
sponsored health, life and disability benefi t plans. These consolidated fi nancial statements include all of the assets and
liabilities of all sponsored plans of the Corporation. Pension and other employee benefi ts expenses are recorded net of costs
recovered from these entities pertaining to employees contractually assigned by the Corporation to these entities based on
an agreed upon formula. The cost recovery reduces the Corporation’s benefi t cost.
H) EMPLOYEE PROFIT SHARING PLAN
The Corporation has an employee profi t sharing plan. Expenses are calculated annually on full calendar year results and recorded
throughout the year as a charge to salary and wage expense based on the estimated annual payment under the plan.
I) STOCK-BASED COMPENSATION PLANS
Certain employees of the Corporation participate in Air Canada’s Long-Term Incentive Plan, which provide for the grant of
stock options and Performance Share Units (“PSUs”), as further described in Note 10.
The Corporation changed its accounting policy for awards of stock based compensation granted to Corporation employees
with a graded vesting schedule. Prior to January 1, 2009, the fair value of stock options with a graded vesting schedule
was recognized as compensation expense and a credit to Contributed surplus on a straight line basis over the applicable
vesting period. Effective January 1, 2009, the fair value of stock options with a graded vesting schedule is determined based
on different expected lives for the options that vest each year, as it would be if the award were viewed as several separate
awards, each with a different vesting date, and it is accounted for on that basis. The new accounting policy provides more
reliable and relevant information about the effects of the transactions. For a stock option award attributable to an employee
who is eligible to retire at the grant date, the fair value of the stock option award is expensed on the grant date. For a stock
option award attributable to an employee who will become eligible to retire during the vesting period, the fair value of the
stock option award is recognized over the period from the grant date to the date the employee becomes eligible to retire.
The amount of compensation cost recognized at any date at least equals the value of the vested options at that date.
The impact of the change in accounting policy for awards granted to Corporation employees with a graded vesting schedule
was immaterial to any prior period and therefore no adjustments were made to such prior periods.
For grants of PSUs that are accounted for as equity settled instruments, the Corporation recognizes Compensation
expense offset by Contributed surplus equal to the market value of an Air Canada common share at the date of grant
on a straight line basis over the applicable vesting period. Compensation expense is adjusted for subsequent changes in
management’s estimate of the number of PSUs that are expected to vest. For grants of PSUs that are accounted for as
cash settled instruments, the Corporation recognizes Compensation expense offset by Other long-term liabilities equal to
the market value of an Air Canada common share at the date of grant on a straight line basis over the applicable vesting
period. Compensation expense is adjusted for subsequent changes in the market value of Air Canada common shares and
management’s estimate of the number of PSUs that are expected to vest.