Air Canada 2012 Annual Report Download - page 94

2012 Air Canada Annual Report
94
The Corporation enters into interest rate, foreign currency, fuel derivatives and share forward contracts to manage the
associated risks. Derivative instruments are recorded on the Consolidated Statement of Financial Position at fair value,
including those derivatives that are embedded in financial or non-financial contracts that are required to be accounted for
separately. Changes in the fair value of derivative instruments are recognized in Non-operating income (expense). These
derivative contracts are included in the Consolidated Statement of Financial Position at fair value in Prepaid expenses and
other current assets, Deposits and other assets, Accounts payable and accrued liabilities, or Other long-term liabilities based
on the terms of the contractual agreements. All cash flows associated with purchasing and selling derivatives are classified as
operating cash flows in the Consolidated Statement of Cash Flow.
The Corporation has implemented the following classifications:
 Cash and cash equivalents and Short-term investments are classified as held-for-trading and any period change in fair
value is recorded through Interest income in the Consolidated Statement of Operations.
 Restricted cash is classified as held-for-trading and any period change in fair value is recorded through Interest income in
the Consolidated Statement of Operations.
 Aircraft related and other deposits are classified as loans and receivables and are measured at amortized cost using the
effective interest rate method. Interest income is recorded in the Consolidated Statement of Operations, as applicable.
 Accounts receivable are classified as loans and receivables and are measured at amortized cost using the effective interest
rate method. Interest income is recorded in the Consolidated Statement of Operations, as applicable.
 Accounts payable, credit facilities, and bank loans are classified as other financial liabilities and are measured at
amortized cost using the effective interest rate method. Interest expense is recorded in the Consolidated Statement of
Operations, as applicable.
 Investments in equity instruments are recorded as available-for-sale financial assets within Deposits and other assets;
available-for-sale financial assets are measured at fair value with gains or losses generally recorded in Other
comprehensive income (“OCI”).
M) FOREIGN CURRENCY TRANSLATION
The functional currency of Air Canada and its subsidiaries is the Canadian dollar. Monetary assets and liabilities denominated
in foreign currencies are translated into Canadian dollars at rates of exchange in effect at the date of the Consolidated
Statement of Financial Position. Non-monetary assets and liabilities, revenues and expenses arising from transactions
denominated in foreign currencies, are translated at the historical exchange rate or the average exchange rate during the
period, as applicable. Adjustments to the Canadian dollar equivalent of foreign denominated monetary assets and liabilities
due to the impact of exchange rate changes are recognized in Foreign exchange gain (loss).
N) INCOME TAXES
The tax expense for the period comprises current and deferred income tax. Tax expense is recognized in the Consolidated
Statement of Operations, except to the extent that it relates to items recognized in OCI or directly in equity, in which case
the tax is netted with such items.
The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheet date in the jurisdictions where the Corporation and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject
to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.