Air Canada 2012 Annual Report Download - page 118
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2012 Air Canada Annual Report
118
10. PROVISIONS FOR OTHER LIABILITIES
The following table provides a continuity schedule of all recorded provisions. Refer to Note 18 for additional information on
Litigation provisions. Current provisions are recorded in Accounts payable and accrued liabilities.
Maintenance (a) Asset
retirement (b) Litigation Other (c) Total provisions
At December 31, 2011
Current $ 52 $ – $ 37 $ – $ 89
Non-current 548 21 – – 569
600 21 37 – 658
Provisions arising during the year $ 71 $ – $ – $ 18 $ 89
Amounts disbursed (48) – (8) – (56)
Changes in estimated costs (32) 5 – – (27)
Accretion expense 8 1 – – 9
Foreign exchange gain (14) – – – (14)
At December 31, 2012 $ 585 $ 27 $ 29 $ 18 $ 659
Current $ 14 $ – $ 29 $ 18 $ 61
Non-current 571 27 – – 598
$ 585 $ 27 $ 29 $ 18 $ 659
(a) Maintenance provisions relate to the provision for the costs to meet the contractual return conditions on aircraft under
operating leases. The provision relates to leases with expiry dates ranging from 2013 to 2024 with the average remaining
lease term of approximately four years. The maintenance provisions take into account current costs of maintenance
events, estimates of inflation surrounding these costs as well as assumptions surrounding utilization of the related
aircraft. Assuming the aggregate cost for return conditions increases by 2%, holding all other factors constant, there
would be a cumulative balance sheet adjustment to increase the provision by $11 at December 31, 2012 and an increase
to maintenance expense in 2013 of approximately $1. If the discount rates were to increase by 1%, holding all other
factors constant, there would be a cumulative balance sheet adjustment to decrease the provision by $12 at
December 31, 2012. Due to low market rates of interest, a 1% decrease in discount rates was not considered a reasonable
scenario.
(b) Under the terms of certain land and facilities leases, the Corporation, including each Fuel Facility Corporation, has an
obligation to restore the land to vacant condition at the end of the lease and to rectify any environmental damage for
which it is responsible. If it were found that the Fuel Facility Corporations had to contribute to any remediation costs,
each contracting airline would share pro rata, based on system usage, in the costs. The related leases expire over terms
ranging from 2013 to 2039. These provisions are based on numerous assumptions including the overall cost of
decommissioning and remediation and the selection of alternative decommissioning and remediation approaches. The
non-current provision is recorded in Other long-term liabilities.
(c) A liability of $18 was recorded in Wages, salaries and benefits related to employee profit sharing payments. The liability
is an estimate based upon a number of assumptions and the Corporation’s assessment as to the expected outcome
related to this matter.