Westjet 2015 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2015 Westjet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 101

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101

WestJet Annual Report 2015 | 50
Current and deferred tax benefit or expense is recognized in the same period as the related transaction or event is recognized
in net earnings.
(iv) Fair value of equity-settled share-based payments
Grants under our equity-settled share-based compensation plans are measured at the fair value of the equity instrument
granted. We use an option pricing model to determine the fair value of certain share-based payments. Inputs to the model are
subject to various estimates about volatility, interest rates, dividend yields and expected life of the units issued. Fair value
inputs are subject to market factors as well as internal estimates. We consider historic trends together with any new
information to determine the best estimate of fair value at the date of grant.
Separate from the fair value calculation, we are required to estimate the expected forfeiture rate of equity-settled share-based
payments. We have assessed forfeitures to be insignificant based on the underlying terms of our compensation plans.
The cost of our equity-settled share-based payments is recognized as part of salaries and benefits expense line item with a
corresponding increase to equity reserves over the related service period.
(v) Fair value of derivative instruments
We use various financial derivative instruments such as forwards and swaps to manage fluctuations in foreign exchange rates
and interest rates.
The fair value of derivative instruments is estimated using inputs, including forward prices, foreign exchange rates, interest
rates and historical volatilities. These inputs are subject to change on a regular basis based on the interplay of various market
forces. Consequently, the fair value of our derivative instruments are subject to regular changes in fair value each reporting
period. Please refer to
2015 Results of Operations – Foreign exchange
and
Liquidity and Capital Resources – Financing
on
page 19 and page 31, respectively, of this MD&A for a discussion of the significant assumptions made in determining fair value
of our derivatives designated in an effective hedging relationship at December 31, 2015.