2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
Diluted EPS is calculated by adjusting the weighted average number of shares outstanding for dilutive potential shares.
The Corporation's potentially dilutive shares are comprised of stock options and convertible notes. The number of
shares included with respect to time vesting options is computed using the treasury stock method unless they are anti-
dilutive. Under this method, the proceeds from the exercise of such instruments are assumed to be used to purchase
shares at the average market price for the period and the difference between the number of shares issued upon
exercise and the number of shares assumed to be purchased is included in the calculation. The number of shares
included with respect to performance-based employee share options is treated as contingently issuable shares because
their issue is contingent upon satisfying specified conditions in addition to the passage of time. If the specified conditions
are met, then the number of shares included is also computed using the treasury stock method unless they are anti-
dilutive.
The weighted average number of shares outstanding in diluted EPS is also adjusted for the number of shares that
would be issued on the conversion of the convertible notes. Additionally, the net income (loss) is adjusted for the after-
tax effect of any changes to net income (loss) that would result from the conversion of the convertible notes, including
interest recognized in the period, foreign exchange recognized on the debt principal, and the mark to market revaluation
of the embedded derivative unless the result of the adjustments is anti-dilutive.
P) AIRCRAFT FUEL INVENTORY AND SPARE PARTS AND SUPPLIES INVENTORY
Inventories of aircraft fuel, spare parts and supplies are measured at cost being determined using a weighted average
formula, net of related obsolescence provision, as applicable.
The Corporation did not recognize any write-downs on inventories or reversals of any previous write-downs during the
periods presented. Included in Aircraft maintenance is $62 million related to spare parts and supplies consumed during
the year (2022 - $51 million).
Q) PROPERTY AND EQUIPMENT
Property and equipment are recognized using the cost model. Property under leases, recognized as right-of-use assets,
and the related obligation for future lease payments are initially recorded at an amount equal to the lesser of fair value
of the asset and the present value of those lease payments.
The Corporation allocates the amount initially recognized in respect of an item of property and equipment to its
significant components and depreciates separately each component. Property and equipment are depreciated to
estimated residual values based on the straight-line method over their estimated service lives. Aircraft and flight
equipment are componentized into airframe, engine, and cabin interior equipment and modifications. Airframes and
engines are depreciated over periods not exceeding 25 years, with residual values initially estimated at 10% of the
original cost and updated for changes in estimates over time. Spare engines and related parts ("rotables") are
depreciated over the average remaining useful life of the fleet to which they relate with residual values initially estimated
at 10%. Cabin interior equipment and modifications are depreciated over the lesser of eight years or the remaining
useful life of the aircraft. Cabin interior equipment and modifications to aircraft on lease are amortized over the lesser
of eight years or the term of the lease. Major maintenance of airframes and engines, including replacement spares and
parts, labour costs and/or third-party maintenance service costs, are capitalized and amortized over the average
expected life between major maintenance events. Major maintenance events typically consist of more complex
inspections and servicing of the aircraft. All power-by-the-hour fleet maintenance contract costs are charged to
operating expenses in the income statement as incurred. Buildings are depreciated on a straight-line basis over their
useful lives not exceeding 50 years or the term of any related lease, whichever is less. Leasehold improvements are
amortized over the lesser of the lease term or 10 years. Ground and other equipment is depreciated over periods
ranging from 3 to 25 years.
Residual values and useful lives are reviewed at least annually, and depreciation rates are adjusted accordingly on a
prospective basis. Gains and losses on disposals of property and equipment are determined by comparing the proceeds
with the carrying amount of the asset and are included as part of non-operating gains and losses in the consolidated
statement of operations.
R) LEASES
Accounting for Leases and Right-of-Use Assets
Leases are recognized as a right-of-use asset and corresponding liability at the date of which the leased asset is
available for use by the Corporation. Each lease payment is allocated between the liability and interest expense. The
interest cost is charged to the consolidated statement of operations over the lease period to produce a constant rate of
interest on the remaining balance of the liability for each period.
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