Air Canada 2011 Annual Report Download - page 91

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2011 Consolidated Financial Statements and Notes
91
The Corporation records an asset and related provision for the costs associated with the retirement of long-lived tangible
assets when a legal or constructive obligation to retire such assets exists. The provision recorded in Other long-term liabilities
is measured as the best estimate of the expenditure required to settle the present obligation at each reporting period. The
associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and then amortized in
accordance with the accounting policy in Note 3T. In subsequent periods, the asset retirement provision is adjusted for the
passage of time through charges to Interest expense. Any change in the amount of the underlying cash flows, due to changes
in the discount rate or changes in the estimate of the expenditure required to settle the present obligation, adjusts both the
asset retirement provision and the related asset. Refer to Note 11 for a continuity schedule of recorded provisions.
BB) AIRCRAFT LEASE PAYMENTS IN EXCESS OF OR LESS THAN RENT EXPENSE
Total aircraft operating lease rentals over the lease term are amortized to operating expense (aircraft rent) on a straight-line
basis. Included in Deposits and other assets and Other long-term liabilities are the differences between the straight line
aircraft rent expense and the payments as stipulated under the lease agreement.
CC) EXCEPTIONAL ITEMS
Exceptional items are those items that in management’s view are required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Corporation’s financial performance.
DD) SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of
operations, has been identified as the Chief Executive Officer. Air Canada is managed as one operating segment based on how
financial information is produced internally for the purposes of making operating decisions.
EE) ACCOUNTING STANDARDS AND AMENDMENTS ISSUED BUT NOT YET ADOPTED
The following is an overview of accounting standard changes that the Corporation will be required to adopt in future years.
Except as otherwise noted below for IFRS 9 and IAS 32, the standards are effective for the Corporation’s annual periods
beginning on or after January 1, 2013, with earlier application permitted. The Corporation does not expect to adopt any of
these standards before their effective dates. The Corporation continues to evaluate the impact of these standards on its
consolidated statement of operations and financial position.
IFRS 9 – Financial Instruments
IFRS 9 introduces new requirements for the classification and measurement of financial assets. IFRS 9 requires all recognized
financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently
measured at amortized cost or fair value. Specifically, financial assets that are held within a business model whose objective is
to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest
on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other
financial assets including equity investments are measured at their fair values at the end of subsequent accounting periods.
Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS
39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities
designated at fair value through profit and loss would generally be recorded in other comprehensive income.
IFRS 9 is effective for annual periods beginning on or after January 1, 2015.
IFRS 10 – Consolidation
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS,
consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation—Special Purpose Entities and parts of IAS 27
Consolidated and Separate Financial Statements.