Air Canada 2010 Annual Report Download - page 63

2010 Management’s Discussion and Analysis
63
Accounting Policy Significant Accounting Policy Changes under IFRS and Expected Impact
Employee Benefits Actuarial gains and losses of Post Employment and Post Retirement Benefits
Policy choices:
Under IAS 19 “Employee benefits” (“IAS19”), actuarial gains and losses may either be:
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when they exceed either 10% of the greater of the obligation and market-related
value of plan assets at the beginning of the period) (the ‘corridor approach’);
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gains or losses, provided that the same basis is applied consistently from period to
period;
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recycling to income, however with reclassifications to retained earnings.
Policy selection: The Corporation expects to recognize actuarial gains and losses in other
comprehensive income and retained earnings.
Differences from existing Canadian GAAP: Under existing Canadian GAAP, the corridor approach
was used and cumulative actuarial gains and losses in excess of 10% of the greater of the obligation
and market-related value of plan assets at the beginning of the period is amortized in profit or loss.
Fair value of plan assets versus market-related value of plan assets
Policy choices: There are no policy choices available under IFRS. The expected return on plan assets is
based on actual plan assets.
Differences from existing Canadian GAAP: Under existing Canadian GAAP, a market-related value of
assets was used whereby the difference between actual and expected return was gradually recognized
over four years.
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
IFRIC 14 “IAS 19 - The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction” (“IFRIC 14”) addresses the application of paragraph 58 of IAS 19 which limits the
measurement of a defined benefit asset to “the present value of economic benefits available in the
form of refunds from the plan or reductions in future contributions to the plan” plus cumulative
unrecognized net losses and past service cost.
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.
Policy choices: There are no policy choices available under IFRS.
Differences from existing Canadian GAAP: There is Canadian GAAP guidance related to the limit
on the carrying amount of an accrued benefit asset and recognition of a related valuation allowance.
However, IFRS and Canadian GAAP had different methods of calculating the defined benefit asset limit.
Furthermore, Canadian GAAP did not address accounting for an additional liability due to minimum
funding requirements.