Note 1(m) explains that WestJet expenses all maintenance and repairs costs it incurs.

Compare that note with a similar one from WestJet’s 2003 annual report where it is explained that the company capitalizes some of the maintenance costs it incurs and expenses others. How do you think these different ways of accounting for maintenance and repairs would affect WestJet’s financial statements? When answering consider how financial statements would differ under one accounting treatment versus the other. Would a different accounting treatment change the actual economic activity and performance of WestJet? How might the perceptions of users of the financial statements be affected by different accounting treatments?

WestJet Airlines Ltd. (WestJet) was founded in 1996 by a team of Calgary entrepreneurs, headed by Clive Beddoe, as a Western Canadian regional carrier with three aircraft flying to five cities. Today, WestJet is Canada’s leading high-value low-fare airline, offering scheduled service to 66 destinations in Canada, the United States, Mexico, and the Caribbean, with its fleet of 81 Boeing Next-
Generation 737-series aircraft. WestJet is traded on the TSX under the symbols WJA and WJA.A.
WestJet’s consolidated balance sheets, statements of earnings and comprehensive income, and retained earnings along with some extracts from the notes to the financial statements, are provided in Exhibit 3-1.