Air Canada 2007 Annual Report Download - page 89

Consolidated Financial Statements and Notes
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As described in Note 10, some of the Corporation’s employees perform work for ACE, and others are contractually assigned
to ACTS Aero Technical Support & Services Inc. (“ACTS Aero”) or Aeroplan Limited Partnership (“Aeroplan”). These employees
are members of the Corporation’s sponsored defi ned benefi t pension plans and also participate in the Corporation’s
sponsored health, life and disability future benefi t plans. These consolidated fi nancial statements include all of the assets
and liabilities of all sponsored plans of the Corporation. Pension expenses are recorded net of costs recovered from related
parties pertaining to employees assigned by the Corporation to the related parties based on an agreed upon formula. The
cost recovery reduces the Corporation’s benefi t cost with an offset to related party receivables.
I) EMPLOYEE PROFIT SHARING PLAN
The Corporation has an employee profi t sharing plan. Payments are calculated annually on full calendar year results and recorded
throughout the year as a charge to salary and wage expense based on the estimated annual payment under the plan.
J) STOCK-BASED COMPENSATION PLANS
Certain employees of the Corporation, for the relevant periods, participate in ACE, Air Canada and/or Jazz stock based
compensation plans, as described in Note 12.
The fair value of stock options or units granted to Corporation employees is recognized as compensation expense and a
credit to contributed surplus on a straight line basis over the applicable vesting period. For a stock option or unit award
attributable to an employee who is eligible to retire at the grant date, the fair value of the stock option or unit award is
expensed on the grant date. For a stock option or unit award attributable to an employee who will become eligible to retire
during the vesting period, the fair value of the stock option or unit award is recognized over the period from the grant date
to the date the employee becomes eligible to retire. The amount of compensation cost recognized at any date at least
equals the value of the vested portion of the options at that date. Refer to Note 12 for a discussion of the accelerated
vesting of ACE options.
ACE, Air Canada, and Jazz also maintain employee share and unit purchase plans for shares and units. Under these plans,
contributions by the Corporation’s employees are matched to a specifi c percentage by the Corporation. These contributions
are included in salaries, wages and benefi ts expense. Upon the closing of the Air Canada IPO described in Note 3, Air Canada
employees are limited to participating in the Air Canada plan and not the ACE plan.
K) MAINTENANCE AND REPAIRS
Maintenance and repair costs for both leased and owned aircraft, including line maintenance, component overhaul and
repair, and maintenance checks, are charged to operating expenses as incurred, with the exception of maintenance and
repair costs related to return conditions on short-term aircraft leases, which are accrued over the term of the lease. Line
maintenance consists of routine daily and weekly scheduled maintenance inspections and checks, overhaul and repair
involves the inspection or replacements of major parts, and maintenance checks consist of more complex inspections and
servicing of the aircraft.
L) OTHER OPERATING EXPENSES
Included in other operating expenses are expenses related to building rent and maintenance, terminal handling, professional
fees and services, crew meals and hotels, advertising and promotion, insurance costs, credit card fees, ground costs for
Air Canada Vacations packages, and other expenses. Expenses are recognized as incurred.
M) FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
Under the Corporation’s risk management policy derivative fi nancial instruments are used only for risk management
purposes and not for generating trading profi ts.