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292006 | WestJet Annual Report
ACCOUNTING POLICIES AND
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are defi ned as those that require
us to make assumptions about matters that are highly uncertain
at the time the accounting estimates are made, and could
potentially result in materially different results under different
assumptions and conditions. For further discussion of these
and other accounting policies we follow, see Note 1 to our
consolidated fi nancial statements.
We have identifi ed the following areas that contain critical
accounting estimates utilized in the preparation of our fi nancial
statements:
PROPERTY AND EQUIPMENT
We make estimates about the expected useful lives, projected
residual values, lease-return conditions and the potential for
impairment of our property and equipment. In estimating the
lives and expected residual values of our fl eet, we rely upon
annual independent appraisals, recommendations from Boeing
and actual experience with the same aircraft types. Revisions
to the estimates for our fl eet can be caused by changes in the
utilization of the aircraft or changing market prices of used
aircraft of the same type. We evaluate our estimates and
potential impairment on all property and equipment annually
and when events and circumstances indicate that the assets
may be impaired.
NON-REFUNDABLE GUEST CREDITS
We also make estimates in accounting for our liability related
to certain types of non-refundable guest credits. We may issue
future travel credits related to guest compensation for fl ight
delays, missing baggage and other inconveniences as a gesture
of good faith. These types of credits are non-refundable and
expire one year from the date of issue. We record a liability
based on the estimated incremental cost of a one-way fl ight in
the period the credit is issued. The utilization of guest credits is
recorded as revenue when the guest has fl own or upon expiry.
DEFERRED SALES AND MARKETING COSTS
We defer sales and marketing costs related to advanced ticket
sales, we estimate the amount to defer based on the proportion
of advanced ticket sales to total bookings on an annualized
basis. This amount is included on our balance sheet in prepaid
expenses.
RIAZ VERJEE
Customer Service Agent
Through our cautious fi nancial
management, we have maintained
one of the most favourable balance
sheets in the airline industry.