Air Canada 2009 Annual Report Download - page 67

2009 Management’s Discussion and Analysis
67
The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction
In July 2007, the IASB issued IFRIC 14 IAS 19 – The Limit of a Defi ned Benefi t Asset, Minimum Funding Requirements and
their Interaction (“IFRIC 14”). The Interpretation addresses the application of paragraph 58 of IAS 19 which limits the
measurement of a defi ned benefi t asset to “the present value of economic benefi ts available in the form of refunds from
the plan or reductions in future contributions to the plan” plus cumulative unrecognised net losses and past service cost.
Questions have arisen about when refunds or reductions in future contributions should be regarded as available, particularly
when a minimum funding requirement exists. Further, minimum funding requirements may give rise to a liability if the
required contributions will not be available to the entity once they have been paid.
IFRIC 14 provides guidance regarding (a) when refunds or reductions in future contributions should be regarded as available
in accordance with paragraph 58 of IAS 19, (b) how a minimum funding requirement might affect the availability of
reductions in future contributions and (c) when a minimum funding requirement might give rise to a liability. This is a
detailed piece of guidance for which there is no Canadian-specifi c equivalent. In addition, there is some lack of clarity
around how the requirements of the IFRIC are to be interpreted in a Canadian environment.
The Corporation has not fi nalized the impact of IFRIC 14 with respect to the accounting for the limits of any defi ned
benefi t assets.
Other long-term employee benefi ts
Under Canadian GAAP, there is no separate category for other long-term employee benefi ts. IFRS takes the approach that
the introduction of, or changes to, other long-term employee benefi ts rarely causes a material amount of past service cost.
For these reasons, IAS 19 requires a simplifi ed method of accounting for other long-term employee benefi ts. This method
differs from the accounting required for post-employment benefi ts as follows:
• actuarial gains and losses are recognised immediately and no ‘corridor’ is applied; and
• all past service cost is recognised immediately.
The Corporation will adopt this revised accounting policy on transition to IFRS for other long-term employee benefi ts.
Income taxes
Current accounting policy
The Corporation utilizes the assets and liability method of accounting for income taxes under which future income tax
assets and liabilities are recognized for the estimated future income tax consequences attributable to differences between
the fi nancial statement carrying value amount and the tax basis of assets and liabilities. Management uses judgment and
estimates in determining the appropriate rates and amounts in recording future taxes, giving consideration to timing and
probability. Actual taxes could signifi cantly vary from these estimates as a result of future events, including changes in
income tax law or the outcome of reviews by tax authorities and related appeals. The resolution of these uncertainties and
the associated fi nal taxes may result in adjustment to the Corporation’s tax assets and tax liabilities.
Future income tax assets are recognized to the extent that realization is considered more likely than not. The Corporation
considers past results, current trends and outlooks for future years in assessing realization of income tax assets.
Expected IFRS accounting policy
The Corporation has not fi nalized analyzing the impact of IAS 12 Income taxes with respect to the accounting for
income taxes.