Airtran 2001 Annual Report Download - page 27

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Measurement
of
Impairment
In
accordance with Statement
of
Financial Accounting Standards No.
121
(SFAS
121),
"Accounting for the Impairment
of
Long-Lived Assets and for
Long-Lived Assets to be Disposed
of,"
we record impairment losses on long-lived assets used in operations when events or circumstances indicate
that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the net book value
of
those assets. See Note
13.
Intangibles
The trade name and intangibles resulting from business acquisitions consist of cost in excess
of
net assets acquired, and are being amortized using
the straight-line method over
30
years. Accumulated amortization at December
31,
2001 and 2000, was approximately $6.4 million and
$5.1
million,
respectively. Pursuant to Statement
of
Financial Accounting Standards No. 142
(SFAS
142), "Goodwill and Other Intangible Assets," effective January
1,
2002, goodwill and indefinite lived intangibles, such as trade names, will no longer be amortized but will be subject to periodic impairment reviews.
See "Recently Issued Accounting Standards" below.
Capitalized
Interest
Interest attributable to funds used to finance the acquisition of new aircraft
is
capitalized as an additional cost
of
the related asset. Interest
is
capitalized
at our weighted-average interest rate on long-term debt
or,
where applicable, the interest rate related to specific borrowings. Capitalization
of
interest
ceases when the asset
is
placed in service.
In
2001,2000
and 1999, approximately $8.0 million, $8.8 million and $6.7 million of interest cost was
capitalized, respectively.
Aircraft and Engine
Maintenance
We account for airframe and engine overhaul costs using the direct-expensing method. Overhauls are performed on acontinuous basis, and the cost
of overhauls and routine maintenance costs for airframe and engine maintenance are charged to maintenance expense as incurred.
Advertising Costs
Advertising costs are charged to expense
in
the period the costs are incurred. Advertising expense was approximately $17.5 million, $15.7 million and
$14.8 million for the years ended December
31,
2001, 2000 and 1999, respectively.
Revenue Recognition
Passenger and cargo revenue is recognized when transportation is provided. Transportation purchased but not yet used is included
in
air traffic liability.
Frequent Flyer Program
We accrue the estimated incremental cost
of
providing free travel for awards earned under our A+ Rewards Program.
Stock-Based Compensation
We grant stock options for afixed number
of
shares to our officers, directors, key employees and consultants, with an exercise price equal to or below
the fair value
of
the shares
at
the date
of
grant. We account for stock option grants
in
accordance with Accounting Principles Board Opinion No. 25
(APB
25),
"Accounting for Stock Issued
to
Employees," and accordingly recognize compensation expense only if the market price
of
the underlying
stock exceeds the exercise price
of
the stock option on the date of grant.
Statement of Financial Accounting Standards No. 123
(SFAS
123), "Accounting for Stock-Based Compensation," provides an alternative to APB 25 in
accounting for stock-based compensation issued to employees. However, we will continue to account for stock-based compensation
in
accordance
wittl APB 25. See Note
11.