Airtran 2008 Annual Report Download - page 67

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In accounting for long-lived assets, we must estimate the useful lives and salvage values of the assets. The
actual useful lives and salvage values could be different from the estimates. Generally, changes in estimated
lives and salvage values are accounted for by adjusting depreciation and amortization expense prospectively.
New Accounting Pronouncement
In May 2008, the FASB issued Staff Position APB 14-1 (FSP APB 14-1), Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) . FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on
conversion to separately account for the liability (debt) and equity (conversion option) components of the
instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate, unless the embedded
conversion option is required to be separately accounted for as a derivative under SFAS 133. FSP APB 14-1 is
effective for fiscal years and interim periods beginning after December 15, 2008. Though early adoption is not
permitted, the Staff Position must be applied retrospectively to all periods presented. The adoption of this Staff
Position in 2009 will affect the accounting for our 7.0% Convertible Notes due 2023 and is expected to result in
additional annual interest expense of approximately $8.6 million in 2009 and $4.7 million in 2010, assuming the
7.0% Convertible Notes will be settled in 2010. The retroactive application of this Staff Position to 2003 is
expected to result in additional annual interest expense of approximately $2.3 million in 2003, gradually
increasing to $7.4 million in 2008.
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