2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
through depreciation and amortization expense. For the purposes of sensitivity analysis on these estimates, a 50%
reduction to residual values on aircraft with remaining useful lives greater than five years results in an increase of $14
million to annual depreciation expense. For aircraft with shorter remaining useful lives, the residual values are not
expected to change significantly.
Maintenance Provisions
The recording of maintenance provisions related to return conditions on aircraft leases requires management to make
estimates of the future costs associated with the maintenance events required under the lease return condition and
estimates of the expected future maintenance condition of the aircraft at the time of lease expiry. These estimates take
into account current costs of these maintenance events, estimates of inflation surrounding these costs as well as
assumptions surrounding utilization of the related aircraft. Any difference in the actual maintenance cost incurred at the
end of the lease and the amount of the provision is recorded in Aircraft maintenance expense in the period. The effect
of any changes in estimates, including changes in discount rates, inflation assumptions, cost estimates or lease
expiries, is recognized as an adjustment to the right-of-use asset. Refer to Note 10(a) for additional information.
Income Taxes
Since 2020, the net deferred income tax assets related to unused tax losses and other deductible temporary differences
have not been recognized. As a result of the COVID-19 pandemic, there was considerable negative evidence relating
to losses that were incurred at that time and assumptions as to the timing of reversal of temporary differences include
expectations about the future results of operations and future cash flows. Management continues to assess the
available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit
use of the existing deferred tax assets. Deferred tax assets have only been recognized to the extent of taxable
temporary differences expected to reverse and generate taxable income against which the deferred tax assets can be
utilized. The future income tax deductions underlying the unrecognized deferred income tax assets remain available
for use in the future to reduce taxable income. Refer to Note 11 Income taxes for additional information.
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