Air Canada 2012 Annual Report Download - page 104

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2012 Air Canada Annual Report
104
5. INTANGIBLE ASSETS
International
route rights
and slots
Marketing
based trade
names
Contract and
customer
based
Technology
based
(internally
developed)
Total
Year ended December 31, 2011
At January 1, 2011 $ 97 $ 87 $ 16 $ 117 $ 317
Additions – – – 30 30
Amortization – – (4) (31) (35)
At December 31, 2011 $ 97 $ 87 $ 12 $ 116 $ 312
At December 31, 2011
Cost $ 97 $ 87 $ 20 $ 298 $ 502
Accumulated amortization – – (8) (182) (190)
$ 97 $ 87 $ 12 $ 116 $ 312
Year ended December 31, 2012
At January 1, 2012 $ 97 $ 87 $ 12 $ 116 $ 312
Additions – 1 – 35 36
Amortization – – (5) (29) (34)
At December 31, 2012 $ 97 $ 88 $ 7 $ 122 $ 314
At December 31, 2012
Cost $ 97 $ 88 $ 20 $ 333 $ 538
Accumulated amortization – – (13) (211) (224)
$ 97 $ 88 $ 7 $ 122 $ 314
Certain international route rights and slots are pledged as security for senior secured notes as described in Note 8(b).
An annual impairment review is conducted on all intangible assets that have an indefinite life. International route rights and
slots and marketing based trade names are considered to have an indefinite life. The impairment review is carried out at the
level of a cash-generating unit. On this basis, an impairment review was performed at the North American and international
fleet levels for aircraft and related assets supporting the operating fleet. A summary of the allocation of the indefinite lived
intangible assets to the cash-generating units is presented below.
2012 2011
North American 41 41
International 144 143
$ 185 $ 184
The recoverable amount of the cash-generating units has been measured based on its value in use, using a discounted cash
flow model. Cash flow projections are based on the annual business plan approved by the Board of Directors of Air Canada. In
addition, management-developed projections are made covering a three-year period. These cash flows are management’s best
estimate of future events taking into account past experience and future economic assumptions, such as the forward curves
for crude-oil and the exchange rates. Cash flows beyond the three-year period are projected to increase consistent with the
long-term growth assumption of the airline considering various factors such as industry growth assumptions. The pre-tax
discount rate applied to the cash flow projections is derived from the Corporation’s weighted average cost of capital adjusted
for taxes.