Alaska Airlines and Horizon Air 2009 Annual Report Download - page 184

Uncertain Tax Positions
The Company has identified its federal tax return
and its state tax returns in Alaska, Oregon, and
California as “major” tax jurisdictions. The
periods subject to examination for the
Company’s federal and Alaska income tax
returns are the 2003 through 2008 tax years;
however, the 2003 to 2005 tax returns are
subject to examination only to a limited extent
due to net operating losses carried forward from
and carried back to those periods. In California,
the income tax years 2000 through 2008 remain
open to examination. The 2000 to 2004
California tax returns are subject to examination
only to the extent of the net operating loss
carryforwards from those years that were utilized
in 2005 and 2006. In Oregon, the income tax
years 2001 to 2008 remain open to
examination. The 2001 to 2004 Oregon tax
returns are subject to examination only to the
extent of net operating loss carryforwards from
those years that were utilized in 2006 and later
years.
Because of the resolution of uncertain tax
positions in the fourth quarter of 2009, the
Company reevaluated its tax position. As a
result, the Company recorded a $20.5 million
reduction of the liability. The Company also
reversed $2.0 million of previously accrued
interest on these tax positions through interest
expense in the consolidated statements of
operations. At December 31, 2009, the total
amount of unrecognized tax benefits of $1.3
million is recorded as a liability, all of which
would impact the effective tax rate.
No interest or penalties related to these tax
positions were accrued as of December 31,
2009.
Changes in the liability for unrecognized tax
benefits during 2008 and 2009 are as follows
(in millions):
Balance at December 31, 2007 .............. $27.9
Gross increases—tax positions in prior period .... 1.4
Gross decreases—tax positions in prior period . . . (11.2)
Gross increases—current-period tax positions .... 5.6
Settlements .............................. —
Lapse of statute of limitations ................ —
Balance at December 31, 2008 .............. $23.7
Gross increases—tax positions in prior period .... —
Gross decreases—tax positions in prior period . . . (22.5)
Gross increases—current-period tax positions .... 0.1
Settlements .............................. —
Lapse of statute of limitations ................ —
Balance at December 31, 2009 .............. $ 1.3
NOTE 12. FINANCIAL INSTRUMENTS
Fair Value Measurements
Accounting standards define fair value as the
exchange price that would be received for an
asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for
the asset or liability in an orderly transaction
between market participants on the
measurement date. The standards also establish
a fair value hierarchy, which requires an entity to
maximize the use of observable inputs and
minimize the use of unobservable inputs when
measuring fair value. There are three levels of
inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for
identical assets or liabilities.
Level 2—Observable inputs other than Level 1
prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or
can be corroborated by observable market data
for substantially the full term of the assets or
liabilities.
Level 3—Unobservable inputs that are supported
by little or no market activity and that are
significant to the fair value of the assets or
liabilities.
Cash, Cash Equivalents and Marketable
Securities
The Company uses the “market approach” in
determining the fair value of its cash, cash
equivalents and marketable securities. The
securities held by the Company are valued based
on observable prices in active markets.
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