Air Canada 2012 Annual Report Download - page 100

2012 Air Canada Annual Report
100
IFRS 12 – Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special
purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces
significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in
other entities.
IFRS 13 – Fair Value Measurement
Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair
value measurements. IFRS 13 is a more comprehensive standard for fair value measurement and disclosure requirements for
use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or
paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes
disclosures about fair value measurement.
Amendments to IAS 19 – Employee Benefits
The amendments to IAS 19 make significant changes to the recognition and measurement of defined benefit pension expense
and termination benefits, and enhance the disclosures for employee benefits. Actuarial gains and losses are renamed
‘remeasurements’ and will be recognized immediately in OCI. Remeasurements recognized in OCI will not be recycled through
profit or loss in subsequent periods. The amendments also accelerate the recognition of past service costs whereby they are
recognized in the period of a plan amendment, irrespective of whether the benefits have vested. The annual expense for a
funded benefit plan will be computed based on the application of the discount rate to the net defined benefit asset or liability,
including interest on any liability in respect of minimum funding requirements.
A number of other amendments have been made to recognition, measurement and classification including those re-defining
short-term and other long-term benefits guidance on the treatment of taxes related to benefit plans, guidance on risk/cost
sharing factors and expanded disclosures.
The Corporation’s current accounting policy for employee benefits for the immediate recognition of actuarial gains and losses
in OCI is consistent with the requirements in the new standard, however, additional disclosures and the computation of
annual expense based on the application of the discount rate to the net defined benefit asset or liability will be required in
relation to the revised standard, including interest on any liability in respect of minimum funding requirements.
Upon retrospective application of the new standard on January 1, 2013, the Corporation expects restated net income for 2012
to be lower than originally reported under the current accounting standard. The decrease is expected to arise from net
financing expense relating to the pension benefit liability which will be calculated using the discount rate used to value the
benefit obligation. As the discount rate is lower than the expected rate of return on plan assets, consistent with the
Corporation’s current view and long-term historical experience, financing expense will increase as the interest attributable to
plan assets will decline. The difference, if any, between the actual rate of return on plan assets and the discount rate, would be
included in other comprehensive income as a remeasurement. Under the new standard, the interest cost on the additional
minimum funding liability will be recorded in the consolidated statement of operations, whereas it is reported in other
comprehensive income under the current standard. The impact of this change is estimated to decrease restated net income
for 2012 in the amount of $102 and increase other comprehensive income in the same amount, with no net impact on total
comprehensive income. This impact is not expected to be indicative of 2013 expense as the additional minimum liability,
which forms the basis of this element of interest cost, has been reduced from $1,965 at December 31, 2011 to $335 at
December 31, 2012 as disclosed in Note 9.
The total expected impact of the amended standard on the consolidated statement of operations, including the presentation
of interest cost on the additional minimum funding liability, is an increase to Net financing expense relating to employee
benefits of $272 for the year ended December 31, 2012, and a decrease to Salary, wages and benefits of $2 for the year ended
December 31, 2012, with an offset to other comprehensive income of $273. The net result of these combine to produce an
increase of $3 to total comprehensive income, with a corresponding decrease of $3 to the other employee future benefits
liability for the year ended December 31, 2012. The amended standard will not impact the consolidated statement of cash
flows.