Air Canada 2014 Annual Report Download - page 96

96 2014 Annual Report
contractual agreements. All cash flows associated
with purchasing and selling derivatives are classified
as operating cash flows in the consolidated statement
of cash flow.
The Corporation has implemented the
following classifications:
• Cash and cash equivalents and Short-term
investments are classified as held-for-trading and
any period change in fair value is recorded through
Interest income in the consolidated statement of
operations.
• Restricted cash is classified as held-for-trading and
any period change in fair value is recorded through
Interest income in the consolidated statement of
operations.
• Aircraft related and other deposits are
classified as loans and receivables and are
measured at amortized cost using the
effective interest rate method. Interest income
is recorded in the consolidated statement of
operations, as applicable.
• Accounts receivable are classified as loans and
receivables and are measured at amortized cost
using the effective interest rate method. Interest
income is recorded in the consolidated statement
of operations, as applicable.
• Accounts payable, credit facilities and bank loans
are classified as other financial liabilities and are
measured at amortized cost using the effective
interest rate method. Interest expense is recorded
in the consolidated statement of operations, as
applicable.
M. FOREIGN CURRENCY TRANSLATION
The functional currency of Air Canada and its
subsidiaries is the Canadian dollar. Monetary assets
and liabilities denominated in foreign currencies are
translated into Canadian dollars at rates of exchange
in effect at the date of the consolidated statement of
financial position. Non-monetary assets and liabilities,
revenues and expenses arising from transactions
denominated in foreign currencies, are translated at
the historical exchange rate or the average exchange
rate during the period, as applicable. Adjustments
to the Canadian dollar equivalent of foreign
denominated monetary assets and liabilities due to
the impact of exchange rate changes are recognized in
Foreign exchange gain (loss).
N. INCOME TAXES
The tax expense for the period comprises current and
deferred income tax. Tax expense is recognized in the
consolidated statement of operations, except to the
extent that it relates to items recognized in OCI or
directly in equity, in which case the tax is netted with
such items.
The current income tax expense is calculated on the
basis of the tax laws enacted or substantively enacted
at the balance sheet date in the jurisdictions where
the Corporation and its subsidiaries operate and
generate taxable income. Management periodically
evaluates positions taken in tax returns with respect
to situations in which applicable tax regulations are
subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is recognized, using the liability
method, on temporary differences arising between
the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not
recognized if they arise from the initial recognition
of goodwill. Deferred income tax is determined
using tax rates and laws that have been enacted or
substantively enacted by the balance sheet date and
are expected to apply when the related deferred
income tax asset is realized or the deferred income
tax liability is settled.
Deferred income tax assets are recognized only to the
extent that it is probable that future taxable profit will
be available against which the temporary differences
can be utilized.
O. EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated
by dividing the net income (loss) for the period
attributable to the shareholders of Air Canada by
the weighted average number of common shares
outstanding during the period. Shares held in trust
for employee share-based compensation awards are
treated as treasury shares and excluded from basic
shares outstanding in the calculation of basic EPS.
Diluted EPS is calculated by adjusting the weighted
average number of common shares outstanding for
dilutive potential common shares. The Corporation’s
potentially dilutive common shares comprise stock
options, warrants and any shares held in trust for
employee share-based compensation awards. The
number of shares included with respect to time
vesting options and warrants is computed using the
treasury stock method unless they are anti-dilutive.
Under this method, the proceeds from the exercise of
such instruments are assumed to be used to purchase
Class B Voting Shares at the average market price for
the period and the difference between the number
of shares issued upon exercise and the number of
shares assumed to be purchased are included in the
calculation. The number of shares included with