Air Canada 2012 Annual Report Download - page 90

2012 Air Canada Annual Report
90
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation prepares its financial statements in accordance with generally accepted accounting principles in Canada
(“GAAP”) as set out in the Handbook of the Canadian Institute of Chartered Accountants – Part 1 (“CICA Handbook”) which
incorporates International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”).
These financial statements were approved for issue by the Board of Directors of the Corporation on February 6, 2013.
These financial statements are based on the accounting policies as described below. These policies have been consistently
applied to all the periods presented, unless otherwise stated.
A) BASIS OF MEASUREMENT
These financial statements have been prepared under the historical cost convention, except for the revaluation of available-
for-sale financial assets, cash, cash equivalents and short-term investments, restricted cash and derivative instruments which
are measured at fair value.
B) PRINCIPLES OF CONSOLIDATION
These financial statements include the accounts of Air Canada and its subsidiaries. Subsidiaries are those entities (including
special purpose entities) which Air Canada controls by having the power to govern the financial and operating policies of the
entity. All inter-company balances and transactions are eliminated.
Non-controlling interests represent equity interests in subsidiaries owned by outside parties. The share of net assets of
subsidiaries attributable to non-controlling interests is presented as a component of equity.
Special Purpose Entities
The Corporation has aircraft leasing transactions with a number of special purpose entities. Under SIC Interpretation 12 –
Consolidation of Special Purpose Entities, the Corporation controls and consolidates leasing entities covering 30 aircraft (35 as
at December 31, 2011).
The Corporation participates in fuel facilities arrangements operated through fuel facility corporations (the "Fuel Facility
Corporations"), along with other airlines to contract for fuel services at various major Canadian airports. The Fuel Facility
Corporations are entities incorporated under federal or provincial statutes in order to acquire, finance and lease assets used in
connection with the fuelling of aircraft and ground support equipment. The Fuel Facilities Corporations operate on a cost
recovery basis. Under SIC Interpretation 12 – Consolidation of Special Purpose Entities, the Corporation controls and
consolidates three of the Fuel Facility Corporations located in Canada (three as at December 31, 2011).
C) PASSENGER AND CARGO REVENUES
Passenger and cargo revenues are recognized when the transportation is provided, except for revenue on unlimited flight
passes which is recognized on a straight-line basis over the period during which the travel pass is valid. The Corporation has
formed alliances with other airlines encompassing loyalty program participation, code sharing and coordination of services
including reservations, baggage handling and flight schedules. Revenues are allocated based upon formulas specified in the
agreements and are recognized as transportation is provided. Passenger revenue also includes certain fees and surcharges and
revenues from passenger-related services such as ticket changes, seat selection, and excess baggage which are recognized as
the services are provided.
Airline passenger and cargo advance sales are deferred and included in Current liabilities. Advance sales also include the
proceeds from the sale of flight tickets to Aimia Canada Inc. (“Aeroplan”), a corporation that provides loyalty program services
to Air Canada and purchases seats from Air Canada pursuant to the Commercial Participation and Services Agreement
between Aeroplan and Air Canada (the "CPSA").