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notes to financial statements December 31, 2007 2. summary of significant accounting policies (continued) Derivative financial instruments that are not designated by the Authority to be in an effective hedging relationship will be carried at fair value with the changes in fair value, including any payments and receipts made or received, being recorded in interest and financing costs. Realized and unrealized gains or losses associated with derivative financial instruments, which have been terminated, designated from a hedging relationship or cease to be effective prior to maturity, will be deferred and recognized in the period in which the underlying hedged item is realized. In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related derivative financial instrument, any realized or unrealized gain or loss on such derivative financial instrument will be recognized in the statement of operations. 3. changes in accounting policy On January 1, 2007, the Authority adopted the Canadian Institute of Chartered Accountants’ (“CICA”) revised standards on recognition and measurement and presentation of financial instruments. The standards are titled 3855 – Financial Instruments – Recognition and Measurement and 3861 – Financial Instruments – Disclosure and Presentation. The standards are retroactively applied, but are prospectively presented. Upon adoption, the Authority has elected to review contracts for embedded derivatives subsequent to the elected transition date of January 1, 2003 in accordance with 3855 – Financial Instruments – Recognition and Measurement. (a) Effective Interest Method The new rules require transaction costs to be included in the debt balances and recognized as an adjustment to interest expense over the life of the debt. The Authority is also required to use the effective interest method to recognize bond interest expense where the amount to be recognized varies over the life of the debt based on the principal outstanding. Previously, transaction costs were amortized on a straight-line basis into the statement of operations. As at January 1, 2007, the Authority reclassified deferred financing costs to longterm debt. This resulted in a decrease in deferred financing costs of $1.101 million and a corresponding decrease in long-term debt of $1.101 million. (b) Hedges The new rules require deferred amounts relating to cash flow hedges, which were discontinued before the end of the original hedge term, to be removed from the balance sheet and recorded in the accumulated unrealized changes in net assets. Accordingly, the deferred financing costs of $2.761 million were reclassified as at January 1, 2007. 3. changes in accounting policy (continued) These deferred costs will continue to be amortized to interest and financing costs in the statement of operations over the remaining term of the previously hedged instruments. 4. capital assets Capital assets consist of the following: (in thousands of dollars) 2007 2006 Accumulated Net book Net book Cost amortization value value $ $ $ $ Computer hardware and software 6,608 4,306 2,302 3,260 Leasehold improvements 182,994 15,791 167,203 151,911 Machinery, equipment, furniture and fixtures 6,659 2,740 3,919 4,173 Vehicles 8,172 3,954 4,218 4,643 Construction in progress 8,208 – 8,208 6,236 5. long-term debt 212,641 26,791 185,850 170,223 Long-term debt consists of the following: 2007 2006 (in thousands of dollars) $ $ 5.503%, non-amortizing Series A Revenue Bonds due July 19, 2041. Interest payable semi-annually in arrears on January 19 and July 19 of each year until maturity, commencing on January 19, 2007. 150,000 150,000 Transport Canada deferred rent, non-interest bearing, repayment in monthly installments of $6,700 which commenced in 2006. 644 724 150,644 150,724 Less current portion 80 80 Less transaction costs (net of accumulated amortization - $32,000) 1,069 – 149,495 150,644 HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2007 ANNUAL REPORT 16
notes to financial statements December 31, 2007 5. long-term debt (continued) Bond issue In July 2006, the Authority completed a $150 million Revenue Bond issue. The $150 million 5.503% Series A Revenue Bonds, are due on July 19, 2041. The net proceeds from this offering are being used to finance the 10 year Capital Plan, and for general corporate purposes. These include the funding of a $4.1 million Debt Service Reserve Fund and a $6.6 million Operating and Maintenance Reserve Fund required by the Master Trust Indenture entered into by the Authority in connection with the offering. The bonds are direct obligations of the Authority ranking pari passu with all other indebtedness issued under the Master Trust Indenture. Reserve funds Pursuant to the terms of the Master Trust Indenture, the Authority is required to establish and maintain with a trustee a Debt Service Reserve Fund with a balance at least equal to 50% of annual debt service costs. As at December 31, 2007, the Debt Service Reserve Fund included $4.1 million in interest bearing deposits held in trust. These trust funds are held for the benefit of bondholders for use in accordance with the terms of the Master Trust Indenture. The Authority is required to maintain an Operating and Maintenance Reserve Fund of approximately $6.6 million. The Operating and Maintenance Reserve Fund must be established and funded as required by the Master Trust Indenture, for the benefit of bondholders. The balance in the Operating and Maintenance Reserve Fund is equal to at least 25% of certain defined operating and maintenance expenses for the previous fiscal period. For 2008, approximately $7.2 million will be required to fund the Operating and Maintenance Reserve Fund. The Operating and Maintenance Reserve Fund may be satisfied by cash, letters of credit, or the undrawn availability under a committed credit facility. Deferred Financing Costs 2007 2006 (in thousands of dollars) $ $ Deferred financing costs – 3,912 Less Accumulated amortization – 50 – 3,862 In accordance with the adoption of CICA 3855 standards, certain balances previously classified as deferred financing costs, have now been reclassified on the balance sheet. (See note 3, Changes in Accounting Policy) 5. long-term debt (continued) Capitalized interest Interest on long-term debt of $210,019 (2006 - $1,966,365) was capitalized as part of construction in progress during the year. 6. airport improvement fees On January 1, 2001, the Authority implemented an AIF of $10 per local boarded passenger to fund the cost of a major capital program. These fees are collected by the air carriers for a fee of 6% under an agreement between the Authority, the Air Transport Association of Canada, and the air carriers serving the Halifax Robert L. Stanfield International Airport. Under the agreement, AIF revenue may only be used to pay for the capital and related financing costs as jointly agreed with air carriers operating at the Halifax Robert L. Stanfield International Airport. A summary of the AIF collected and capital and related financing expenditures are as follows: 2007 2006 (in thousands of dollars) $ $ AIF revenue (net): AIF revenue 14,489 13,122 AIF collection costs (852) (806) 13,637 12,316 Interest on surplus funds 3,164 1,756 Net funds received 16,801 14,072 Capital expenditures funded by AIF 24,708 44,388 Interest expense funded by AIF 8,125 2,762 32,833 47,150 Excess of expenditures over AIF revenue 16,032 33,078 Prior years expenditures now ratified* 24,600 – Excess of expenditures over AIF revenue, beginning of year 92,803 59,725 Excess of expenditures over AIF revenue, end of year 133,435 92,803 *As per terms of the MOA with the air carriers. HALIFAX INTERNATIONAL AIRPORT AUTHORITY 2007 ANNUAL REPORT 17
Page 2 and 3: OUR PEOPLE - Burton Wright, Ken Cha
Page 5 and 6: 2007 also marked the beginning of t
Page 7 and 8: w Not all our efforts last year wer
Page 9 and 10: Eighty per cent of our passenger tr
Page 11 and 12: Scheduled and Charter Passenger Ser
Page 13 and 14: w Firefighter Tim Bull worked on th
Page 15 and 16: financial statements auditors’ re
Page 17: notes to financial statements Decem
Page 21 and 22: notes to financial statements Decem
Page 23 and 24: CORPORATE GOVERNANCE HALIFAX INTERN
Page 25 and 26: BOARD OF DIRECTORS Peter McDonough,

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