Air Canada 2012 Annual Report Download - page 95

2012 Consolidated Financial Statements and Notes
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Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are
not recognized if they arise from the initial recognition of goodwill; and deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws
that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized.
O) EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing the net income (loss) for the period attributable to the shareholders
of Air Canada by the weighted average number of ordinary shares outstanding during the period. Shares held in trust for
employee share-based compensation awards are treated as treasury shares and excluded from basic shares outstanding in the
calculation of basic EPS.
Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding for dilutive potential
ordinary shares. The Corporation’s potentially dilutive ordinary shares comprise stock options, warrants, and any shares held in
trust for employee share-based compensation awards. The number of shares included with respect to time vesting options
and warrants is computed using the treasury stock method unless they are anti-dilutive. Under this method, the proceeds
from the exercise of such instruments are assumed to be used to purchase Class B Voting Shares at the average market price
for the period and the difference between the number of shares and the number of shares assumed to be purchased are
included in the calculation. The number of shares included with respect to performance-based employee share options and
PSUs are treated as contingently issuable shares because their issue is contingent upon satisfying specified conditions in
addition to the passage of time. If the specified conditions are met, then the number of shares included is also computed using
the treasury stock method unless they are anti-dilutive.
P) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include $218 pertaining to investments with original maturities of three months or less at
December 31, 2012 ($356 as at December 31, 2011). Investments include bankers’ acceptances and bankers’ discount notes,
which may be liquidated promptly and have original maturities of three months or less.
Q) SHORT-TERM INVESTMENTS
Short-term investments, comprised of bankers’ acceptances and bankers’ discount notes, have original maturities over three
months, but not more than one year.
R) RESTRICTED CASH
The Corporation has recorded Restricted cash under Current assets representing funds held in trust by Air Canada Vacations in
accordance with regulatory requirements governing advance ticket sales, as well as funds held in escrow accounts relating to
Air Canada Vacations credit card booking transactions, recorded under Current liabilities, for certain travel related activities.
Restricted cash with maturities greater than one year from the balance sheet date is recorded in Deposits and other assets.
This restricted cash relates to funds on deposit with various financial institutions as collateral for letters of credit and other
items.
S) AIRCRAFT FUEL INVENTORY AND SPARE PARTS AND SUPPLIES INVENTORY
Inventories of aircraft fuel and spare parts, other than rotables, and supplies are measured at the lower of cost and net
realizable value, with cost being determined using a weighted average formula.
The Corporation did not recognize any write-downs on inventories or reversals of any previous write-downs during the periods
presented. Included in Aircraft maintenance is $43 related to spare parts and supplies consumed during the year (2011 – $39).