United states securities and exchange commission


Accounting for the time value of options



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Accounting for the time value of options

The Company accounts for the time value of options in accordance with IFRS 9 (2013), which requires all derivative financial instruments to be initially recognized at fair value. Subsequent measurement for options purchased and designated as CFH requires that the option’s changes in fair value be segregated into its intrinsic value (which will be considered the hedging instrument’s effective portion in OCI) and its correspondent changes in extrinsic value (time value and volatility). The extrinsic value changes will be considered as a cost of hedging (recognized in OCI in a separate component of equity) and accounted for in income when the hedged items also is recognized in income.

Outstanding derivative financial instruments may require collateral to guarantee a portion of the unsettled loss prior to maturity. The amount of collateral delivered in pledge, is presented as part of non-current assets under the caption guarantee deposits, and the amount of the collateral is reviewed and adjusted on a daily basis based on the fair value of the derivative position (Note 11).

 


t)

Financial instruments – Disclosures

IFRS 7 requires a three-level hierarchy for fair value measurement disclosures and requires entities to provide additional disclosures about the relative reliability of fair value measurements (Notes 4 and 5).

 


u)

Treasury shares

The Company’s equity instruments that are reacquired (treasury shares), are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between the carrying amount and the consideration received, if reissued, is recognized in additional paid in capital.

Share-based payment options exercised during the reporting period are settled with treasury shares (Note 17).

 

F-29


Table of Contents


v)

Operating segments

The Company is managed as a single business unit that provides air transportation and related services, accordingly it has only one operating segment.

The Company has two geographic areas identified as domestic (Mexico) and international (United States of America and Central America) (Note 24).

 

w)

Current versus non-current classification

The Company presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is: (i) expected to be realized or intended to be sold or consumed in normal operating cycle, (ii) expected to be realized within twelve months after the reporting period, or, (iii) cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.

A liability is current when: (i) it is expected to be settled in normal operating cycle, (ii) it is due to be settled within twelve months after the reporting period, or, (iii) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

 

x)

Retrospective changes in classification

During 2016, the Company modified the classification of prepaid income tax to reflect more appropriately and separately the assets for current tax, as required by the IAS 1 Presentation of Financial Statements. Comparative amounts in the consolidated statements of financial position were restated for consistency. The effects of this reclassification were recognized retrospectively in the consolidated statements of financial position as of December 31, 2015, in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors . As a result, Ps.15,028 was reclassified from ‘recoverable taxes’ to ‘recoverable income tax’, Ps.29,461 was reclassified from ‘recoverable taxes’ to ‘income taxes payable’; and Ps.11,786 from non-current assets ‘guarantee deposits’ to current assets ‘guarantee deposits’ to reflect the appropriate presentation of short-term and long-term guarantee deposits, as follows:

 









































 

  

As previously
reported 2015


 

  

Reclassifications

 

  

As reclassified
2015


 

Financial position:

  










  










  










Current assets

  










  










  










Recoverable taxes

  

Ps.

201,394

 

  

Ps.

(44,489



  

Ps.

156,905

 

Recoverable income tax

  

 

—  

 

  

 

15,028

 

  

 

15,028

 

Guarantee deposits

  

 

861,236

 

  

 

11,786

 

  

 

873,022

 













Non-current assets

  










  










  










Guarantee deposits

  

 

4,704,389

 

  

 

(11,786



  

 

4,692,603

 













Current liabilities

  










  










  










Income taxes payable

  

 

337,997

 

  

 

29,461

 

  

 

308,536

 

 

F-30


Table of Contents


y)

Impact of new International Financial Reporting Standards

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