Delta Airlines 2003 Annual Report Download - page 84

Table of Contents
Derivative Financial Instruments
We account for derivative financial instruments in accordance with SFAS 133. These derivative instruments include fuel hedge contracts, interest rate swap
agreements and equity warrants and other similar rights in certain companies (see Note 4).
Fuel Hedge Contracts
Our fuel hedge contracts qualify for hedge accounting under SFAS 133. We record the fair value of our fuel hedge contracts on our Consolidated Balance
Sheets and regularly adjust the balances to reflect changes in the fair values of those contracts.
Effective gains or losses related to the fair value adjustments of the fuel hedge contracts are recorded in shareowners' (deficit) 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 other income
(expense) during the life of the contract.
Interest Rate Swap Agreements
We record interest rate swap agreements that qualify as fair value hedges under SFAS 133 at their fair value on our Consolidated Balance Sheets and adjust
these amounts and the related debt to reflect changes in their fair values. We record net periodic interest rate swap settlements 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 our
Consolidated Statements of Operations in the period that the evaluations are completed.
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