Air Canada 2011 Annual Report Download - page 90

2011 Air Canada Annual Report
90
Air Canada has international route and slot rights which enable the Corporation to provide services internationally. The value
of the recorded intangible assets relates to the cost of route and slot rights at Tokyo’s Narita International Airport,
Washington’s Reagan National Airport and London’s Heathrow Airport. Air Canada expects to provide service to these
international locations for an indefinite period.
Air Canada and certain of its subsidiaries have trade names, trademarks, and domain names (collectively, “Trade Names”).
These items are marketing based intangible assets as they are primarily used in the selling and promotion of Air Canada’s
products and services. The Trade Names create brand recognition with customers and potential customers and are capable of
contributing to cash flows for an indefinite period of time. Air Canada intends to continuously re-invest and market the Trade
Names to support classification as indefinite life intangibles. If there were plans to cease using any of the Trade Names, the
specific names would be classified as finite and amortized over the expected remaining useful life.
X) GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Corporation’s share of the net
identifiable assets of the acquired business at the date of acquisition. Goodwill is tested at least annually for impairment and
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. For the purpose of
impairment testing, goodwill is tested for impairment at the lowest level within the entity at which the goodwill is monitored
for internal management purposes, being the operating segment level (Note DD). No impairment losses have been recorded
against the value of goodwill since its acquisition.
Y) IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets include property and equipment, finite lived intangible assets, indefinite lived intangible assets and goodwill.
Assets that have an indefinite useful life, including goodwill are tested at least annually for impairment or when events or
circumstances indicate that the carrying value may not be recoverable. Assets that are subject to depreciation or amortization
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment test is performed by comparing the carrying amount of the asset or group of assets to their
recoverable amount. Recoverable amount is calculated as the higher of an asset’s or cash-generating unit’s fair value less costs
to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows (cash-generating units or CGUs). Management has determined that the appropriate
level for assessing impairments is at the North American (for narrowbody aircraft) and international (for widebody aircraft)
fleet levels for aircraft and related assets supporting the operating fleet. Parked aircraft not used in operations and aircraft
leased or subleased to third parties are assessed for impairment at the individual asset level. Value in use is calculated based
upon a discounted cash flow analysis. An impairment loss is recognized for the amount by which the asset's or cash
generating unit’s carrying amount exceeds its recoverable amount.
Long-lived assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date. Management assesses whether there is any indication that an impairment loss recognized in a prior
period no longer exists or has decreased. In assessing whether there is a possible reversal of an impairment loss, management
considers the indicators that gave rise to the impairment loss. If any such indicators exist that an impairment loss has reversed,
management estimates the recoverable amount of the long-lived asset. An impairment loss recognized in prior periods for an
asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognized. The carrying amount of any individual asset in the
CGU is not increased above the carrying value that would have been determined had the original impairment not occurred. A
reversal of an impairment loss is recognized immediately in the statement of operations.
Z) NON-CURRENT ASSETS (OR DISPOSAL GROUPS) HELD FOR SALE
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered
principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount
and fair value less costs to sell. There are currently no assets held for sale.
AA) PROVISIONS
Provisions are recognized when there is a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the obligation. If the
effect is significant, the expected cash flows are discounted using a rate that reflects, where appropriate, the risks specific to
the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as Interest
expense within Other non-operating expense.