Air Canada 2009 Annual Report Download - page 65

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2009 Management’s Discussion and Analysis
65
17.2 FUTURE ACCOUNTING STANDARD CHANGES
Business Combinations, Consolidated Financial Statements and Non-controlling Interests
The CICA issued three new accounting standards in January 2009: section 1582, Business Combinations, section 1601,
Consolidated Financial Statements, and section 1602, Non-controlling Interests. These new standards will be effective for
fi scal years beginning on or after January 1, 2011. The Corporation is in the process of evaluating the requirements of these
new standards.
Section 1582 replaces section 1581, and establishes standards for the accounting for a business combination. It provides
the Canadian equivalent to International Financial Reporting Standard IFRS 3 – Business Combinations. The section applies
prospectively to business combinations for which the acquisition date is on or after the beginning of the fi rst annual
reporting period beginning on or after January 1, 2011.
Sections 1601 and 1602 together replace section 1600 – Consolidated Financial Statements. Section 1601 establishes
standards for the preparation of consolidated fi nancial statements. Section 1601 applies to interim and annual consolidated
fi nancial statements relating to fi scal years beginning on or after January 1, 2011. Section 1602 establishes standards for
accounting for a non-controlling interest in a subsidiary in consolidated fi nancial statements subsequent to a business
combination. It is equivalent to the corresponding provisions of International Financial Reporting Standard IAS 27 -
Consolidated and Separate Financial Statements and applies to interim and annual consolidated fi nancial statements
relating to fi scal years beginning on or after January 1, 2011.
International Financial Reporting Standards
The Canadian Accounting Standards Board has confi rmed January 1, 2011 as the changeover date for Canadian publicly
accountable enterprises to start using International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board. IFRS uses a conceptual framework similar to Canadian GAAP, but there are signifi cant
differences in recognition, measurement and disclosures.
As a result, the Corporation has developed a plan to convert its consolidated fi nancial statements to IFRS establishing a
cross-functional IFRS team represented by managers in the areas of Accounting, Taxation, IT and Data Systems, Internal
Control and Processes, Planning, Compensation, Treasury, Investor Relations and Legal. Updates regarding the progress of
the conversion plan are provided to the Corporation’s Audit, Finance and Risk Committee on a quarterly basis.
The Corporation has identifi ed the following major differences between its current accounting policies and those required
or expected to apply in preparing IFRS fi nancial statements.
Passenger and cargo revenues
Current accounting policy
Airline passenger and cargo advance sales are deferred and included in current liabilities. Advance sales also include the
proceeds from the sale of fl ight tickets to Aeroplan, a corporation that provides loyalty program services to Air Canada and
purchases seats from Air Canada under the CPSA. Passenger and cargo revenues are recognized when the transportation is
provided, except for revenue on unlimited fl ight passes which is recognized on a straight-line basis over the period during
which the travel pass is valid. The Corporation has formed alliances with other airlines encompassing loyalty program
participation, code sharing and coordination of services including reservations, baggage handling and fl ight schedules.
Revenues are allocated based upon formulas specifi ed in the agreements and are recognized as transportation is provided.
The Corporation performs regular evaluations on the deferred revenue liability which may result in adjustments being
recognized as revenue. Due to the complex pricing structures; the complex nature of interline and other commercial
agreements used throughout the industry; historical experience over a period of many years; and other factors including
refunds, exchanges and unused tickets, certain relatively small amounts are recognized as revenue based on estimates.
Events and circumstances may result in actual results that are different from estimates.
Expected IFRS accounting policy
No signifi cant changes have been identifi ed from the Corporation’s current accounting policy.