Air Canada 2012 Annual Report Download - page 97

2012 Consolidated Financial Statements and Notes
97
W) INTANGIBLE ASSETS
Intangible assets are initially recorded at cost. Indefinite life intangible assets are not amortized while assets with finite lives
are amortized on a straight line basis over their estimated useful lives.
Estimated
Useful
Life
Remaining
amortization
period as at
December 31, 2012
International route rights and slots Indefinite not applicable
Marketing based trade names Indefinite not applicable
Contract and customer based 10 years 2 years
Technology based (internally developed) 5 years 1 to 5 years
Development costs that are directly attributable to the design, development and testing of identifiable software products are
recognized as technology based intangible assets if certain criteria are met, including technical feasibility and intent and
ability to develop and use the technology to generate probable future economic benefits, otherwise they are expensed as
incurred. Directly attributable costs that are capitalized as part of the technology based intangible assets include software-
related, employee and third party development costs and an appropriate portion of relevant overhead. Air Canada has
international route and slot rights which enable the Corporation to provide services internationally. The value of the recorded
intangible assets relates to the cost of route and slot rights at Tokyo’s Narita International Airport, Washington’s Reagan
National Airport and London’s Heathrow Airport. Air Canada expects to provide service to these international locations for an
indefinite period.
Air Canada and certain of its subsidiaries have trade names, trademarks, and domain names (collectively, “Trade Names”).
These items are marketing based intangible assets as they are primarily used in the selling and promotion of Air Canada’s
products and services. The Trade Names create brand recognition with customers and potential customers and are capable of
contributing to cash flows for an indefinite period of time. Air Canada intends to continuously re-invest and market the Trade
Names to support classification as indefinite life intangibles. If there were plans to cease using any of the Trade Names, the
specific names would be classified as finite and amortized over the expected remaining useful life.
X) GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Corporation’s share of the net
identifiable assets of the acquired business at the date of acquisition. Goodwill is tested at least annually for impairment and
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. For the purpose of
impairment testing, goodwill is tested for impairment at the lowest level within the entity at which the goodwill is monitored
for internal management purposes, being the operating segment level (Note DD). No impairment losses have been recorded
against the value of goodwill since its acquisition.
Y) IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets include property and equipment, finite lived intangible assets, indefinite lived intangible assets and goodwill.
Assets that have an indefinite useful life, including goodwill are tested at least annually for impairment or when events or
circumstances indicate that the carrying value may not be recoverable. Assets that are subject to depreciation or amortization
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment test is performed by comparing the carrying amount of the asset or group of assets to their
recoverable amount. Recoverable amount is calculated as the higher of an asset’s or cash-generating unit’s fair value less costs
to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows (cash-generating units or CGUs). Management has determined that the appropriate
level for assessing impairments is at the North American (for narrowbody aircraft) and international (for widebody aircraft)
fleet levels for aircraft and related assets supporting the operating fleet. Parked aircraft not used in operations and aircraft
leased or subleased to third parties are assessed for impairment at the individual asset level. Value in use is calculated based
upon a discounted cash flow analysis. An impairment loss is recognized for the amount by which the asset's or cash
generating unit’s carrying amount exceeds its recoverable amount.