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Notes to Consolidated Financial Statements
As at and for the years ended December 31, 2015 and 2014
(Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts)
WestJet Annual Report 2015 | 80
7. Intangible assets (continued)
December 31, 2015
Cost
Accumulated
amortization
Net book
value
Software
85,348
(55,707)
29,641
Landing rights
17,781
(3,186)
14,595
Other
5,836
(227)
5,609
Assets under development
13,704
-
13,704
122,669
(59,120)
63,549
December 31, 2014
Cost
Accumulated
amortization
Net book
value
Software
73,598
(46,603)
26,995
Landing rights
17,781
(2,298)
15,483
Other
5,836
(139)
5,697
Assets under development
12,448
-
12,448
109,663
(49,040)
60,623
8. Maintenance provisions and reserves
The Corporation’s operating aircraft lease agreements require leased aircraft to be returned to the lessor in a specified operating
condition. The maintenance provision liability represents the present value of the expected future cost. A maintenance expense
is recognized over the term of the provision based on aircraft usage and the passage of time, while the unwinding of the present
value discount is recognized as a finance cost. The majority of the Corporation’s maintenance provision liabilities are recognized
and settled in US dollars. Where applicable, all amounts have been converted to Canadian dollars at the period end foreign
exchange rate.
December 31
2015
December 31
2014
Opening balance
246,579
218,516
Additions
59,061
34,863
Change in estimate(i)
3,677
3,281
Foreign exchange
46,667
20,052
Accretion(ii)
1,667
2,246
Settled
(28,618)
(32,379)
Ending balance
329,033
246,579
Current portion
(85,819)
(54,811)
Long-term portion
243,214
191,768
(i) Reflects changes to the timing and scope of maintenance activities and the discount rate used to present value the liability.
(ii) At December 31, 2015, the Corporation’s aircraft lease maintenance provisions are discounted using a weighted average risk-free rate of approximately
1.0% (December 31, 2014 – 0.91%) to reflect the weighted average remaining term of approximately 27 months (December 31, 2014 – 30 months)
until cash outflow.
A certain number of operating aircraft leases also require the Corporation to pay a maintenance reserve to the lessor.
Maintenance reserves are either refunded when qualifying maintenance is performed or offset against end of lease obligations
for returning leased aircraft in a specified operating condition. Where the amount of maintenance reserves paid exceeds the
estimated amount recoverable from the lessor, the non-recoverable amount is recorded as maintenance expense in the period it
is incurred. Non-recoverable amounts previously recorded as maintenance expense may be recovered and capitalized based on
changes to expected overhaul costs and recoverable amounts over the term of the lease. The Corporation’s maintenance
reserves are recognized and settled in US dollars. All amounts have been converted to Canadian dollars at the period end foreign
exchange rate.
At December 31, 2015, the current portion of maintenance reserves included in prepaid expenses, deposits and other is $15,190
(December 31, 2014 – $54,466) and the long-term portion of maintenance reserves included in other assets is $19,261
(December 31, 2014 – $8,110).