Alaska Airlines and Horizon Air 2007 Annual Report Download - page 195

2007 2006 2005
Capital expenditures(4):
Alaska(3) ...................................... 606.5 565.5 373.8
Horizon ........................................ 227.9 116.6 43.1
Consolidated ................................... 834.4 682.1 416.9
Total assets at end of period:
Alaska(3) ...................................... 4,221.1 3,712.0
Horizon ........................................ 629.0 409.0
Other(2) ....................................... 1,130.3 916.8
Elimination of inter-company accounts ................ (1,489.5) (960.7)
Consolidated ................................... $ 4,490.9 $4,077.1
(1) Alaska mainline revenue represents revenue from passengers aboard Alaska jets, freight and mail revenue, and all other
revenue. Purchased capacity revenue represents that revenue earned by Alaska on capacity provided by Horizon and a small
third party under a capacity purchase arrangement.
(2) Includes the parent company, Alaska Air Group, Inc., including its investments in Alaska and Horizon, which are eliminated in
consolidation.
(3) There are no interest or depreciation expenses associated with purchased capacity flying at Alaska, nor are there any
associated assets or capital expenditures.
(4) Capital expenditures include aircraft deposits, net of deposits returned.
NOTE 16. IMPACT OF STAFF ACCOUNTING BULLETIN NO. 108 (SAB 108)
In September 2006, the SEC issued SAB 108.
SAB 108 expresses SEC staff views regarding
the process by which misstatements in financial
statements are evaluated for purposes of
determining whether those misstatements are
material to the Company’s financial statements.
SAB 108 was effective for fiscal years ending
after November 15, 2006. The transition
provisions of the bulletin permit the Company to
adjust beginning retained earnings for the
cumulative effect of immaterial errors relating to
prior years. The Company adopted SAB 108 in
the fourth quarter of 2006, with an effective date
of January 1, 2006. In accordance with the
bulletin, the Company adjusted beginning
retained earnings for 2006 in the accompanying
consolidated financial statements for the items
described below. Management of the Company
considers these adjustments to be immaterial to
prior periods.
Depreciation of Leasehold Improvements
The Company historically has depreciated
substantially all leasehold improvements over
the shorter of the lease term or their estimated
economic useful life. However, leasehold
improvements at airports were generally
depreciated over their estimated useful lives.
The Company followed the practice of
depreciating leasehold improvements over the
longer period due to the expectation that the
underlying lease would be renewed for at least
the period over which the leasehold
improvements were being depreciated. In
February 2005, the Office of the Chief
Accountant of the Securities and Exchange
Commission (“SEC”) issued interpretive
guidance clarifying its position that leasehold
improvements in an operating lease should be
depreciated by the lessee over the shorter of
their economic lives or the remaining lease term,
as defined in SFAS 13. Our airport lease
agreements do not generally carry a renewal right
in them, which is a key consideration for SFAS
13 “lease term” definitions.
The difference between the depreciation expense
recorded and the depreciation expense that
would have been recorded had the Company
depreciated those leasehold improvements using
the shorter life of the lease term was not
material to the consolidated statements of
operations in any individual year, nor was the
accumulated difference deemed material to the
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ŠForm 10-K