Delta Airlines 2002 Annual Report Download - page 138

Effective gains or losses related to the fair value adjustments of the fuel
hedge contracts are recorded in shareowners' equity as a component of
accumulated other comprehensive income (loss). These gains or losses are
recognized in aircraft fuel expense in the period in which the related aircraft
fuel purchases being hedged are consumed and when the fuel hedge contract is
settled. However, to the extent that the change in fair value of a fuel hedge
contract does not perfectly offset the change in the value of the aircraft fuel
being hedged, the ineffective portion of the hedge is immediately recognized as
a fair value adjustment of SFAS 133 derivatives in other income (expense) on our
Consolidated Statements of Operations. In calculating the ineffective portion of
our hedges under SFAS 133, we include all changes in the fair value attributable
to the time value component and recognize the amount in income during the life
of the contract. Prior to the adoption of SFAS 133, the fuel hedge gains or
losses that were netted against fuel expense included the total fuel-related
hedge premiums.
INTEREST RATE SWAP AGREEMENTS
Our interest rate swap agreements qualify as fair value hedges under SFAS 133.
We record the fair value of these interest rate swap agreements on our
Consolidated Balance Sheets and regularly adjust these amounts and the related
debt to reflect changes in their fair values. Net periodic interest rate swap
settlements are recorded as adjustments to interest expense in other income
(expense) on our Consolidated Statements of Operations.
EQUITY WARRANTS AND OTHER SIMILAR RIGHTS
We record our equity warrants and other similar rights in certain companies at
fair value at the date of acquisition in investments in debt and equity
securities on our Consolidated Balance Sheets. In accordance with SFAS 133, we
regularly adjust our Consolidated Balance Sheets to reflect the changes in the
fair values of the equity warrants and other similar rights, and recognize the
related gains or losses as fair value adjustments of SFAS 133 derivatives in
other income (expense) on our Consolidated Statements of Operations.
REVENUE RECOGNITION
PASSENGER REVENUES
We record sales of passenger tickets as air traffic liability on our
Consolidated Balance Sheets. Passenger revenues are recognized when we provide
the transportation, reducing the related air traffic liability. We periodically
evaluate the estimated air traffic liability and record any resulting
adjustments in the Consolidated Statements of Operations in the period that the
evaluations are completed.
We sell mileage credits in the SkyMiles(R) frequent flyer program to
participating partners such as credit card companies, hotels and car rental
agencies. A portion of the revenue from the sale of mileage credits is deferred
until the credits are redeemed for travel. For accounting purposes, we amortize
the deferred revenue on a straight-line basis over a 30-month period. The
majority of the revenue from the sale of mileage credits, including the
amortization of deferred revenue, is recorded in passenger revenue; the
remaining portion is recorded as an offset to other selling expenses.
CARGO REVENUES
Cargo revenues are recognized in our Consolidated Statements of Operations when
we provide the transportation.
OTHER, NET
We are party to codeshare agreements with certain foreign airlines. Under these
agreements, we sell seats on these airlines' flights, and they sell seats on our
flights, with each airline separately marketing its respective seats. The
revenue from our sale of codeshare seats flown by certain foreign airlines and
the direct costs incurred in marketing the codeshare flights are recorded in
other, net in operating revenues on our Consolidated Statements of Operations.
Our revenue from certain foreign airlines' sale of codeshare seats flown by us
is recorded in passenger revenue on our Consolidated Statements of Operations.
We record revenues under our contract carrier agreements, reduced by related
expenses, in other, net in operating revenues on our Consolidated Statements of
Operations (see Note 9).
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