Air Canada 2014 Annual Report Download - page 103

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103
2014 Consolidated Financial Statements and Notes
INTERNATIONAL
ROUTE RIGHTS
AND SLOTS
MARKETING
BASED TRADE
NAMES
CONTRACT
AND
CUSTOMER
BASED
TECHNOLOGY
BASED
(INTERNALLY
DEVELOPED) TOTAL
YEAR ENDED DECEMBER 31, 2013
At January 1, 2013 $ 97 $ 88 $ 7 $ 122 $ 314
Additions ---30 30
Amortization - - (4) (36) (40)
At December 31, 2013 $ 97 $ 88 $ 3 $ 116 $ 304
AT DECEMBER 31, 2013
Cost $ 97 $ 88 $ 20 $ 363 $ 568
Accumulated amortization - - (17) (247) (264)
$ 97 $ 88 $ 3 $ 116 $ 304
YEAR ENDED DECEMBER 31, 2014
At January 1, 2014 $ 97 $ 88 $ 3 $ 116 $ 304
Additions ---33 33
Amortization - - (3) (29) (32)
At December 31, 2014 $ 97 $ 88 $ - $ 120 $ 305
AT DECEMBER 31, 2014
Cost $ 97 $ 88 $ 20 $ 396 $ 601
Accumulated amortization - - (20) (276) (296)
$ 97 $ 88 $ - $ 120 $ 305
5. INTANGIBLE ASSETS
Certain international route rights and slots are
pledged as security for senior secured notes as
described in Note 8(b).
An annual impairment review is conducted on all
intangible assets that have an indefinite life. International
route rights and slots and marketing based trade names
are considered to have an indefinite life. The impairment
review is carried out at the level of a cash-generating
unit. On this basis, an impairment review was performed
at the North American and international fleet levels for
aircraft and related assets supporting the operating fleet.
The allocation of the indefinite lived intangible assets to
the cash-generating units was $144 to international and
$41 to North American.
The recoverable amount of the cash-generating units
has been measured based on their value in use, using
a discounted cash flow model. Cash flow projections
are based on the annual business plan approved by
the Board of Directors of Air Canada. In addition,
management-developed projections are made
covering a three-year period. These cash flows are
management’s best estimate of future events taking
into account past experience and future economic
assumptions, such as the forward curves for crude-
oil and the applicable exchange rates. Cash flows
beyond the three-year period are projected to increase
consistent with the long-term growth assumption
of the airline considering various factors such as
the Corporation’s fleet plans and industry growth
assumptions. The discount rate applied to the cash
flow projections is derived from the Corporation’s
weighted average cost of capital adjusted for taxes and
specific risks associated with the cash-generating unit
being tested.
Key assumptions are as of the date of the test at
October 31, 2014 and may not be indicative of current
values for these assumptions. Key assumptions used
for the value in use calculations in fiscal 2014 were as
follows:
2014
Discount rate 10.7%
Long-term growth rate 2.5%
Jet fuel price range per barrel $128 – $133
The recoverable amount of both cash-generating
units based on value in use exceeded their respective
carrying values by approximately $3,900. If the
discount rate were increased by 240 basis points,
the excess of recoverable amount over carrying
value would be reduced to nil for one of the cash-
generating units.