Westjet 2014 Annual Report Download - page 65

Notes to Consolidated Financial Statements
As at and for the years ended December 31, 2014 and 2013
(Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts)
WestJet Annual Report 2014 │ 63
1. Statement of significant accounting policies (continued)
(i) Inventory
Inventories are valued at the lower of cost and net realizable value, with cost being determined on a first-in, first-out basis and a
specific item basis depending on the nature of the inventory. The Corporation’s inventory balance consists of aircraft fuel, de-
icing fluid, retail merchandise and aircraft expendables.
(j) Property and equipment
Property and equipment is stated at cost and depreciated to its estimated residual value. Expected useful lives and depreciation
methods are reviewed annually.
Asset class
Basis
Rate
Aircraft, net of estimated residual value
Straight-line
15 to 20 years
Engine, airframe and landing gear overhaul Straight-line 5 to 15 years
Ground property and equipment Straight-line 3 to 25 years
Spare engines and rotables, net of estimated residual value
Straight-line
15 to 20 years
Buildings Straight-line 40 years
Leasehold improvements Straight-line 5 years/Term of lease
Estimated residual values of the Corporation’s aircraft range between $2,500 and $6,000 per aircraft. Spare engines have an
estimated residual value equal to 10% of the original purchase price. Residual values, where applicable, are reviewed annually
against prevailing market rates at the consolidated statement of financial position date.
Major overhaul expenditures are capitalized and depreciated over the expected life between overhauls. All other costs relating to
the maintenance of fleet assets are charged to the consolidated statement of earnings on consumption or as incurred.
Rotable parts are purchased, depreciated and disposed of, on a pooled basis. When parts are purchased, the cost is added to
the pool and depreciated over its useful life of 15 to 20 years. The cost to repair rotable parts is recognized in maintenance
expense as incurred.
(k) Assets held for sale
The Corporation classifies a non-current asset as held for sale if the carrying amount of the asset will be recovered principally
through a sale transaction instead of through continuing use. The Corporation measures any asset held for sale at the lower of:
(i) its carrying amount, or (ii) fair value less costs to sell. Assets held for sale are not depreciated or amortized and are classified
as a current asset on the consolidated statement of financial position until the sale is complete. If the asset is considered a
separate component of the Corporation, then the operating results of this component will be classified as discontinued
operations on the consolidated statement of earnings. If the asset is not considered a separate component, then the operating
results continue to be included in earnings from continuing operations until the time of sale. Any subsequent changes to the fair
value less costs to sell after classication as held for sale are recognized in profit or loss, not to exceed the original carrying
amount of the assets held for sale.
At December 31, 2014, the Corporation has recognized five aircraft as held for sale. These aircraft form part of a transaction for
the sale of 10 Boeing 737-700 series aircraft. The Boeing 737-700 series aircraft were not assessed to be a separate component
of the entity as they are not managed separately from the entire fleet and therefore, the operating results of these aircraft
continue to be included in earnings from continuing operations on the consolidated statement of earnings until such time that
they are delivered. The five undelivered 737-700 series aircraft are classified as current assets on the consolidated statement of
financial position at the contracted purchase price with the buyer less costs to sell. The difference between the carrying amounts
and contracted purchase price was recorded as a loss on disposal of property and equipment. The Corporation has recorded the
aircraft at the contracted Canadian dollar equivalent proceeds using the period end US-dollar foreign exchange rate.