Air Canada 2013 Annual Report Download - page 95

2013 Consolidated Financial Statements and Notes
95
Adjustments to consolidated statement of comprehensive income
Year ended December 31
2013 2012
Increase in other comprehensive income:
Remeasurements of post-employment benefit liabilities $ 312 $ 273
Decrease in net income (312) (270)
Change in total comprehensive income $ – $ 3
With retrospective application of the amended standard as at January 1, 2013, restated net income for 2012 is lower than
originally reported under the previous accounting standard. The decrease arises from net financing expense relating to the
pension benefit liability which is calculated using the discount rate used to value the benefit obligation. As the discount rate is
lower than the expected rate of return on plan assets, financing expense increases as the interest attributable to plan assets
declines. The difference between the actual rate of return on plan assets and the discount rate is included in OCI as a
remeasurement. Also, under the amended standard, the interest cost on the additional minimum funding liability is recorded
in the consolidated statement of operations, whereas it was reported in other comprehensive income under the previous
standard. The impact of this change is that restated net income for 2012 decreases and other comprehensive income
increases by the same amount, with no net impact on total comprehensive income. The amended standard also accelerates
the recognition of past service costs whereby they are recognized in the period of a plan amendment, irrespective of whether
the benefits have vested. The impact of this change is that restated net income and total comprehensive income for the
twelve months ended December 31, 2012 increased $3 for Benefit plan amendments.
The amended standard did not have any net impact on the consolidated statement of cash flows.
H) EMPLOYEE PROFIT SHARING PLANS
The Corporation has employee profit sharing plans. Payments are calculated based on full calendar year results and an
expense recorded throughout the year as a charge to Wages, salaries and benefits based on the estimated annual payment
under the plan.
I) SHARE-BASED COMPENSATION PLANS
Certain employees of the Corporation participate in Air Canada’s Long-Term Incentive Plan, which provides for the grant of
stock options and performance share units (“PSUs”), as further described in Note 14. PSUs are notional share units which are
exchangeable, on a one-to-one basis, as determined by the Board of Directors based on factors such as the remaining number
of shares authorized for issuance under the Long-Term Incentive Plan as described in Note 14, for Air Canada shares, or the
cash equivalent. The options and PSUs granted contain both time and performance based vesting features as those further
described in Note 14.
The fair value of stock options with a graded vesting schedule is determined based on different expected lives for the options
that vest each year, as it would be if the award were viewed as several separate awards, each with a different vesting date, and
it is accounted for over the respective vesting period taking into consideration forfeiture estimates. For a stock option award
attributable to an employee who is eligible to retire at the grant date, the fair value of the stock option award is expensed on
the grant date. For a stock option award attributable to an employee who will become eligible to retire during the vesting
period, the fair value of the stock option award is recognized over the period from the grant date to the date the employee
becomes eligible to retire. The Corporation recognizes compensation expense and a corresponding adjustment to Contributed
surplus equal to the fair value of the equity instruments granted using the Black-Scholes option pricing model taking into
consideration forfeiture estimates. Compensation expense is adjusted for subsequent changes in management’s estimate of
the number of options that are expected to vest.
A prospective change in accounting for PSUs was made in 2013 from cash-settled instruments to equity-settled instruments
based on settlement experience. Grants of PSUs are accounted for as equity settled instruments. Accordingly, the Corporation
recognizes compensation expense offset by Contributed surplus equal to the market value of an Air Canada common share at
the date of grant on a straight line basis over the applicable vesting period, taking into consideration forfeiture estimates.
Compensation expense is adjusted for subsequent changes in management’s current estimate of the number of PSUs that are
expected to vest. Refer to Note 17 for a description of derivative instruments used by the Corporation to hedge the cash flow
exposure to PSUs.