Air Canada 2008 Annual Report Download - page 139

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Consolidated Financial Statements and Notes
139
The following information summarizes the financial statement impact of derivatives designated under fuel hedge accounting:
• During2008,fuelderivativecontractsmaturedwithfairvaluesinfavouroftheCorporationfor$118(2007-$44).
• During2008,fuelderivativecontractswereterminatedwithfairvaluesinfavourofthecounterpartiesfor$137
(2007 - nil). The value of the AOCI balance recognized in connection with these derivatives will be taken into fuel
expense in the period where the derivative was scheduled to mature.
• ThefairvalueofoutstandingfuelderivativesunderhedgeaccountingatDecember31,2008was$405infavourof
the counterparties (2007 – $67 in favour of the Corporation). This balance is reflected within Current liabilities on
the Consolidated Statement of Financial Position due to the counterparty’s ability to terminate the derivatives at
fair value at any time prior to maturity.
• Thechangeinfairvalueoffuelderivativesunderhedgeaccountingduring2008was$(522)(2007-$134):
- The unrealized effective change in the fair value of derivatives recorded in OCI was a loss of $613 (2007 - gain
of $84). The realized effective change in the fair value of derivatives recorded in OCI during 2008 was a gain
of $8 (2007 – gain of $62). OCI amounts for 2008 and 2007 are presented net of tax expense on Air Canada’s
Consolidated Statement of Comprehensive Income.
- The ineffective change in the fair value of derivatives recorded in non-operating income (expense) was a gain of
$83 (2007 - loss of $12). The ineffective portion is calculated as the difference between the change in intrinsic
value and change in fair market value of the derivatives as well as the difference between the Air Canada proxy
derivative value and the counterparty derivative value.
• During 2008, reclassication of realized gains on fuel derivatives resulted in a benet to fuel expense of $79
(2007 - $36). This benefit was recognized through the removal of the amount from AOCI, which is reported as a
reclassification of net realized gains of $57 net of tax (2007 - $25 net of tax).
• During2008,thenetimpacttoAOCIwasadecreaseof$684beforetaxof$22(2007-$110beforetaxof$28).
As at December 31, 2008, the balance in AOCI was $(606). The estimated net amount of existing losses reported in
AOCI that is expected to be reclassified to net income (loss) during the following 12 months is $418 before tax.
The following information summarizes the financial statement impact of derivatives not designated under fuel hedge
accounting, but held as economic hedges:
• During2008,fuelderivativecontractsmaturedinfavouroftheCorporationfor$11(2007-$17).
• During2008,fuelderivativecontractswereterminatedwithfairvaluesinfavourofthecounterpartiesfor$23(2007
- nil).
• ThefairvalueofoutstandingfuelderivativesnotunderhedgeaccountingatDecember31,2008was$15infavour
of the counterparties (2007 - $10 in favour of the Corporation).
• Thechange infairvalue ofthederivativecontractsfortheyearwasalossof$9(2007- gainof$26)and was
recorded in Non-operating income (expense).
As noted above, the total fair value of terminated fuel derivative contracts amounted to $160 during 2008 (2007 - nil). The
cash outflow is included in Fuel and other derivatives in the Consolidated Statement of Cash Flow.
Subsequent to December 31, 2008, the Corporation modified its fuel hedge portfolio with the termination of swap and
sold put option contracts for cash settlements of $156 under hedge accounting and $16 not under hedge accounting, both
in favour of the counterparty. For the derivative contracts under fuel hedge accounting, the value of the AOCI balance
recognized in connection with these derivatives will be taken into fuel expense in the period where the derivative was
scheduled to mature.