Westjet 2004 Annual Report Download - page 38

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WESTJET ANNUAL REPORT 2004
38
the period the credit is issued. The utilization of guest
credits is recorded as revenue when the guest has flown
or upon expiry.
The Company uses the liability method of accounting
for future income taxes. This methodology requires a
significant amount of judgment regarding assumptions
and the use of estimates, which can create significant
variances between actual results and estimates
including the scheduling of our effective tax rate and
the potential realization of future tax assets and
liabilities in the future.
The Accounting Standards Board (“AcSB”) is proposing
to issue three new handbook sections, FINANCIAL
INSTRUMENTS - RECOGNITION AND MEASUREMENT,
Section 3855, HEDGES, Section 3865, and
COMPREHENSIVE INCOME, Section 1530, specifying
when a financial instrument or non-financial derivative
is to be recognized on the balance sheet. These sections
will require a financial instrument or non-financial
derivative to be measured at fair value, amortized cost
or cost; establish how gains and losses are to be
recognized and presented, including introducing
comprehensive income; specify how hedge accounting
should be applied; establish new disclosures about an
entity's accounting for designated hedging relationships
and the methods and assumptions applied in
determining fair values.
The AcSB expects to issue the Sections in early 2005.
The mandatory effective date for Sections 1530,
Comprehensive Income, 3855, Financial Instruments -
Recognition and Measurement, and 3865, Hedges,
would be for interim and annual financial statements
relating to fiscal years beginning on or after October
1, 2006. Earlier adoption will be permitted only as of
the beginning of a fiscal year ending on or after
December 31, 2004.
The AcSB has issued an Exposure Draft proposing
amendments to Section 3500, Earnings per Share. The
AcSB expects to issue a final standard in the first quarter
of 2005. Proposed changes would amend the
computational guidance in Section 3500 for calculating
the number of incremental shares included in diluted
earnings per share when applying the treasury stock
method. When applying the treasury stock method for
year-to-date diluted earnings per share, current guidance
requires that the number of incremental shares included
in the denominator be determined by computing a year-
to-date weighted average of the number of incremental
shares included in each interim diluted earnings per share
calculation. Under the proposed amendments, the
number of incremental shares included in year-to-date
diluted earnings per share would be computed using the
average market price of common shares for the year-
to-date period. Proposed amendments to Section 3500
would also require that, for the purposes of computing
diluted earnings per share, an entity should assume that
a contract that could be settled in cash or common
shares would be settled in common shares, if share
settlement is more dilutive. Proposed amendments would
eliminate provisions that allow an entity to rebut the
assumption that contracts with the option of settling in
either cash or common shares, at the issuer's option, will
be settled in common shares.
The AcSB plans to issue final standards in the first
quarter of 2005. The AcSB will endeavour to make the
Larry Richards, Engine Shop Technician