Air Canada 2010 Annual Report Download - page 31

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2010 Management’s Discussion and Analysis
31
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of $95 million in 2009. Refer to section 12 of this MD&A for additional information on Air Canada’s derivative
instruments.
Gains on foreign exchange amounted to $145 million in 2010
Gains on foreign exchange, which were mainly related to U.S. currency denominated long-term debt, amounted to $145
million in 2010 compared to gains of $657 million in 2009. The gains in 2010 were mainly attributable to a stronger
Canadian dollar at December 31, 2010, compared to December 31, 2009. The December 31, 2010 noon day exchange rate
was US$1 = C$0.9946 while the December 31, 2009 noon day exchange rate was US$1 = C$1.0466.
Provision for income taxes of $48 million in 2010
Air Canada recorded a provision for income taxes of $48 million on pre-tax income of $155 million in 2010. The effective
income tax rate of 31% is affected by the reclassification of losses on fuel derivatives from AOCL to income of $183 million,
which does not attract any net tax recovery due to the reversal of valuation allowance from prior years. The effective
income tax rate is also impacted by certain non-taxable items as well as the reversal of valuation allowance on future
income tax assets arising from fresh start reporting on September 30, 2004.