Air Canada 2008 Annual Report Download - page 98

2008 Air Canada Annual Report
98
accounting, treasury and tax services, corporate real estate, and environmental affairs. Administrative service revenues are
recognized as services are provided. Real estate rental revenues are recognized on a straight line basis over the term of the
lease.
G) EMPLOYEE FUTURE BENEFITS
The cost of pensions, other post-retirement and post-employment benefits earned by employees is actuarially determined
annually as at December 31. This is a change in measurement date of November 30 used in the prior year. The change in
date did not have any significant impact on pension and other benefits expense or the net benefit obligations. The cost is
determined using the projected benefit method prorated on service, market interest rates, and management’s best estimate
of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs.
A market-related valuation method is used to value plan assets for the purpose of calculating the expected return on plan
assets. Under the selected method, the differences between investment returns during a given year and the expected
investment returns are amortized on a straight line basis over 4 years.
Past service costs arising from plan amendments are amortized on a straight-line basis over the average remaining service
period of employees active at the date of amendment. This period does not exceed the average remaining service period of
such employees up to the full eligibility date. The average remaining service life of active employees (or average remaining
life expectancy of retired members for a plan with no active members) is between 7 and 16 years for pension plans and
between 10 and 11 years for post retirement and post employment benefit plans.
Cumulative unrecognized net actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation
or market-related value of plan assets at the beginning of the year are amortized over the remaining service life of active
employees.
As described in Note 8, some of the Corporation’s employees perform work for ACE, and others are contractually assigned to
Aveos Fleet Performance Inc. (“Aveos” and formerly called ACTS Aero Technical Support & Services Inc. (“ACTS Aero”)) and
Aeroplan. These employees are members of the Corporation’s sponsored defined benefit pension plans and also participate
in the Corporation’s sponsored health, life and disability future benefit plans. These consolidated financial statements include
all of the assets and liabilities of all sponsored plans of the Corporation. Pension and other employee benefits expenses are
recorded net of costs recovered from these entities pertaining to employees assigned by the Corporation to these entities
based on an agreed upon formula. The cost recovery reduces the Corporation’s benefit cost.
H) EMPLOYEE PROFIT SHARING PLAN
The Corporation has an employee profit sharing plan. Expenses 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.
I) STOCK-BASED COMPENSATION PLANS
Certain employees of the Corporation, for the relevant periods, participate in ACE and Air Canada stock based compensation
plans, as described in Note 10.
The fair value of stock options 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 award attributable to an
employee who is eligible to retire at the grant date, the fair value of the stock option award is expensed on the grant date.
For a stock option award attributable to an employee who will become eligible to retire during the vesting period, the fair
value of the stock option 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 10 for a discussion of the accelerated vesting of ACE options in 2007.