Air Canada 2008 Annual Report Download - page 58

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2008 Air Canada Annual Report
58
Marketrisk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: foreign exchange risk; interest rate risk; and other price risk, which
includes commodity price risk.
The Corporation uses derivative instruments to reduce market exposures from changes in foreign currency rates, interest
rates, and fuel prices. The Corporation uses derivative instruments only for risk management purposes and not for generating
trading profit. As such, any change in cash flows associated with derivative instruments is designed to be offset by changes
in cash flows related to the risk being hedged.
Asset-BackedCommercialPaper(“ABCP”)
The Corporation has $37 million ($29 million, net of a fair value adjustment) in non-bank sponsored ABCP which has been
recorded in deposits and other assets. The carrying value as at December 31, 2008 was based on a number of assumptions
as to the fair value of the investments, including factors such as estimated cash flow scenarios and risk adjusted discount
rates. The assumptions used in estimating the fair value of the investments are subject to change, which may result in
further adjustments to non-operating results in the future. No adjustments to the carrying value were recorded in 2008.