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2005 WESTJET ANNUAL REPORT
43
1. Significant accounting policies:
(a) Basis of presentation:
These consolidated financial statements include the accounts of WestJet Airlines Ltd. (the “Corporation”)
and its wholly
owned subsidiaries, as well as the accounts of three special-purpose entities, which are utilized to facilitate the financing
of aircraft. The Corporation has no equity ownership in the special-purpose entities; however, the Corporation is the primary
beneficiary of the special-purpose entities’ operations. All inter-company balances and transactions have been eliminated.
The preparation of financial statements in conformity with accounting principles generally accepted in Canada requires
management to make estimates and assumptions regarding significant items such as amounts relating to depreciation
and amortization, non-refundable guest credits, lease return conditions, future income taxes, impairment assessments
of property and equipment, and the valuation of derivative financial instruments that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from these estimates.
(b) Cash and cash equivalents:
Cash and cash equivalents are comprised of cash and all investments that are highly liquid in nature and have a
maturity date of three months or less. Cash and cash equivalents includes short-term investments of $219,030,000
(2004 – $124,207,000).
As at December 31, 2005 cash and cash equivalents include US $6,317,000 (2004 – $4,251,000) of restricted cash.
(c) Revenue recognition:
Guest and charter revenue is recognized when air transportation is provided. Tickets sold but not yet used are included
in the consolidated balance sheet as advance ticket sales.
The Corporation earns revenue under the tri-branded credit card agreement and is included in other revenue. Net retail
sales revenue is recognized at the time the transaction occurs. Revenue related to account activations is deferred and
not recognized until the credit file issued for the new activation is used or expires.
(d) Non-refundable guest credits:
The Corporation, under certain circumstances, may issue future travel credits which are non-refundable and which expire
one year from the date of issue. The utilization of guest credits is recorded as revenue when the guest has flown or upon expiry.
(e) Foreign currency:
Monetary assets and liabilities, denominated in foreign currencies, are translated into Canadian dollars at rates of
exchange in effect at the balance sheet date. Non-monetary assets and revenue and expense items are translated at
rates prevailing when they were acquired or incurred. Foreign exchange gains and losses are included in earnings.
(f) Inventory:
Fuel and supplies are valued at the lower of cost and replacement value. Aircraft expendables and consumables are
expensed as acquired.
Years ended December 31, 2005 and 2004
(Tabular Amounts are Stated in Thousands of Dollars, Except Share and Per Share Data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WestJet Airlines Ltd.