2023 Consolidated Financial Statements and Notes
AIR CANADA
2023 Consolidated Financial Statements and Notes
The current service cost and any past service cost, gains and losses on curtailments or settlements are recorded in
Wages, salaries and benefits generally. The interest arising on the net benefit obligations are presented in Other in
Non-operating income (expense). Net actuarial gains and losses, referred to as remeasurements, are recognized in
Other comprehensive income and Retained earnings without subsequent reclassification to income.
The current service cost is estimated utilizing different discount rates derived from the yield curve used to measure the
defined benefit obligation at the beginning of the year, reflecting the different timing of benefit payments for past service
(the defined benefit obligation) and future service (the current service cost).
The liability in respect of minimum funding requirements, if any, is determined using the projected minimum funding
requirements, based on management's best estimates of the actuarially determined funded status of the plan, market
discount rates and salary escalation estimates. The liability in respect of the minimum funding requirement and any
subsequent remeasurement of that liability are recognized immediately in Other comprehensive income and Retained
earnings (deficit) without subsequent reclassification to income.
Recognized pension assets are limited to the present value of any reductions in future contributions or any future
refunds.
H) EMPLOYEE PROFIT SHARING PLANS
The Corporation has employee profit sharing plans. Payments are calculated based on full calendar year results and
an expense recorded throughout the year, as applicable, as a charge to Wages, salaries and benefits based on the
estimated annual payments under the plans.
I) SHARE-BASED COMPENSATION PLANS
Certain employees of the Corporation participate in Air Canada's Long-Term Incentive Plan, which provides for the
grant of stock options, performance share units ("PSUs") and restricted share units ("RSUS"), as further described in
Note 13. PSUs and RSUs are notional share units which are exchangeable on a one-to-one basis for Air Canada
shares or the cash equivalent, as determined by the Board of Directors.
Options are expensed using a graded vesting model over the vesting period. The Corporation recognizes compensation
expense and a corresponding adjustment to Contributed surplus equal to the fair value of the equity instruments granted
using the Black-Scholes option pricing model taking into consideration forfeiture estimates. Compensation expense is
adjusted for subsequent changes in management's estimate of the number of options that are expected to vest.
PSUs and RSUs are accounted for as cash settled instruments based on settlement experience. In accounting for cash
settled instruments, compensation expense is adjusted for subsequent changes in the fair value of the PSUs and RSUs
taking into account forfeiture estimates. The liability related to cash settled PSUs and RSUS is recorded in Other
long-term liabilities.
Air Canada also maintains an employee share purchase plan. Under this plan, contributions by the Corporation's
employees are matched to a specific percentage by the Corporation. Employees must remain with the Corporation and
retain their shares until March 31 of the subsequent year for vesting of the Corporation's contributions. These
contributions are expensed in Wages, salaries, and benefits expense over the vesting period.
J) MAINTENANCE AND REPAIRS
Maintenance and repair costs for both leased and owned aircraft are charged to Aircraft maintenance as incurred, with
the exception of maintenance and repair costs related to return conditions on aircraft under lease, which are accrued
over the term of the lease, and major maintenance expenditures on owned and leased aircraft, which are capitalized
as described below in Note 2Q.
Maintenance and repair costs related to return conditions on aircraft leases are recorded over the term of the lease for
the end of lease maintenance return condition obligations within the Corporation's leases, offset by a prepaid
maintenance asset to the extent of any related power-by-the-hour maintenance service agreements. Maintenance
provisions for end-of-lease return obligations are recorded, as applicable, on aircraft leases as a maintenance expense
over the term of the lease, taking into account the specific risks of the liability over the remaining term of the lease.
Interest accretion on the provision is recorded in Other non-operating expense. Any changes to the provision for end-
of-lease conditions are recognized as an adjustment to the right-of-use asset and subsequently amortized to the income
statement over the remaining term of the lease. Any difference in the actual maintenance cost incurred and the amount
of the provision are recorded in Aircraft maintenance.
In connection with an amended agreement between Air Canada and a third-party service provider concluded in 2022,
a favourable adjustment of $159 million was recorded in 2022 in Aircraft maintenance expense arising from the
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