Air Canada 2014 Annual Report Download - page 99

99
2014 Consolidated Financial Statements and Notes
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 CC). 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 narrow-
body aircraft) and international (for wide-body
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
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 consolidated 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,
such assets are available for immediate sale in present
condition, 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,
interest accretion on the provision is recorded in
Other non-operating expense.
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.
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 2T. In subsequent periods,
interest accretion on the asset retirement provision
is recorded in Other non-operating 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.