Airtran 2005 Annual Report Download - page 30

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:: 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : :
:: BASIS OF PRESENTATION : :
Our accompanying Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings) and our wholly owned subsidiaries, including our principal subsidiary, AirTran Airways, Inc. (Airways).
All significant intercompany accounts and transactions have been eliminated in consolidation.
: : BUSINESS : :
Airways offers scheduled airline services to 47 locations across the United States, primarily in short-haul markets principally in the eastern United States.
The financial and operating results for any interim period are not indicative of those for the entire year. Air travel tends to be seasonal with the highest level of travel during the winter months to Florida and the
summer months to the northeastern and western United States.
: : USE OF ESTIMATES : :
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Actual results inevitably will differ from those estimates.
:: CASH, CASH EQUIVALENTS AND RESTRICTED CASH : :
All highly liquid investments with maturities of three months or less when purchased are considered to be cash equivalents. Restricted cash primarily represents amounts escrowed relating to aircraft leases and
collateral to support credit card holdbacks for advance ticket sales.
:: SHORT-TERM INVESTMENTS : :
Short-term investments consist of auction rate securities with auction reset periods of less than 12 months, classified as available-for-sale securities and stated at fair value.
: : ACCOUNTS RECEIVABLE : :
Accounts receivable are due primarily from major credit card processors, travel agents, co-branded credit card arrangements and from municipalities related to guaranteed revenue agreements. We provide an
allowance for doubtful accounts equal to the estimated losses expected to be incurred in the collection of accounts receivable based on historical credit card chargebacks and miscellaneous receivables based on
specific analysis. Collateral is generally not required on accounts receivable.
:: SPARE PARTS AND SUPPLIES : :
Spare parts and supplies consist of expendable aircraft spare parts, supplies and prepaid aircraft fuel. These items are stated at the lower of cost or market using the first-in, first-out method (FIFO). These items
are charged to expense when used. Allowances for obsolescence are provided over the estimated useful life of the related aircraft and engines for spare parts expected to be on hand at the date aircraft are retired
from service.
:: ::
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS