Air Canada 2010 Annual Report Download - page 98

2010 Air Canada Annual Report
98
N) INCOME TAXES
The Corporation utilizes the asset and liability method of accounting for income taxes under which future income tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
financial statement carrying amount and the tax basis of assets and liabilities. Future income tax assets and liabilities are
measured using substantively enacted tax rates in effect for the year in which those temporary differences are expected to
be recovered or settled. Income taxes are recognized in the income statement except to the extent that it relates to items
charged or credited to Shareholders’ equity, in which case the taxes are netted with such items. The effect on future income
tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the change is substantively
enacted. Future income tax assets are recognized to the extent that realization is considered more likely than not. The
Corporation applied fresh start reporting on September 30, 2004 under which the assets and liabilities of the Corporation
were comprehensively revalued, excluding goodwill (“fresh start”). The benefit of future income tax assets that existed
at fresh start, and for which a valuation allowance is recorded, will be recognized first to reduce to nil any remaining
intangible assets (on a pro-rata basis) that were recorded upon fresh start reporting with any remaining amount as a
credit to Shareholders’ equity. The benefit of future income tax assets that arise after fresh start will be recognized in the
Consolidated Statement of Operations.
O) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include $497 pertaining to investments with original maturities of three months or less at
December 31, 2010 (2009 - $323). Investments include bankers’ acceptances and bankers’ discount notes, which may be
liquidated promptly and have original maturities of three months or less. The weighted average interest rate on investments
as at December 31, 2010 is 1.37% (2009 - 0.29%).
P) SHORT-TERM INVESTMENTS
Short-term investments, comprised of bankers’ acceptances and bankers’ discount notes, have original maturities over three
months, but not more than one year. The weighted average interest rate on Short-term investments as at December 31, 2010
is 1.13% (2009 - 0.53%).
Q) RESTRICTED CASH
The Corporation has recorded $80 (2009 - $78) in Restricted cash, under Current assets, representing funds held in trust by
Air Canada Vacations in accordance with regulatory requirements governing advance ticket sales, recorded under Current
liabilities, for certain travel related activities.
Restricted cash with maturities greater than one year from the balance sheet date is recorded in Deposits and other assets.
This restricted cash relates to funds on deposit with various financial institutions as collateral for letters of credit and other
items.
R) AIRCRAFT FUEL INVENTORY AND SPARE PARTS AND SUPPLIES INVENTORY
Inventories of aircraft fuel and spare parts and supplies are measured at the lower of cost and net realizable value, with cost
being determined using a weighted average formula.
The Corporation did not recognize any write-downs on inventories or reversals of any previous write-downs during the
periods presented. Included in aircraft maintenance is $36 related to spare parts and supplies consumed during the year
(2009 - $74).
S) PROPERTY AND EQUIPMENT
Property and equipment is initially recorded at cost. Property under capital leases and the related obligation for future lease
payments are initially recorded at an amount equal to the lesser of fair value of the property or equipment and the present
value of those lease payments.