Delta Airlines 2003 Annual Report Download - page 86

Table of Contents
To determine impairments for aircraft used in operations, we group assets at the fleet type level (the lowest level for which there are identifiable cash flows)
and then estimate future cash flows based on projections of passenger yield, fuel costs, labor costs and other relevant factors in the markets in which these
aircraft operate. If an impairment occurs, the amount of the impairment loss recognized is the amount by which the carrying amount of the aircraft exceeds the
estimated fair value. Aircraft fair values are estimated by management using published sources, appraisals and bids received from third parties, as available.
Goodwill and Other Intangible Assets
Prior to our adoption of SFAS 142 on January 1, 2002, goodwill and other intangible assets were amortized over their estimated useful lives (not to exceed
40 years in the case of goodwill). Upon adoption of SFAS 142, we discontinued the amortization of goodwill and other intangible assets with indefinite useful
lives. Instead, in accordance with SFAS 142, we now apply a fair value-based impairment test to the net book value of goodwill and indefinite-lived
intangible assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.
Intangible assets that have determinable useful lives continue to be amortized on a straight-line basis over their remaining estimated useful lives. Our
leasehold and operating rights have definite useful lives and we amortize these assets over their respective lease terms, which range from nine to 19 years.
SFAS 142 requires a two step process in evaluating goodwill for impairment. The first step requires the comparison of the fair value of each reporting unit to
its carrying value. We have three reporting units which have assigned goodwill: Delta-Mainline, ASA and Comair. Our methodology for estimating the fair
value of each reporting unit primarily considers discounted future cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further
testing is required. If the carrying value of a reporting unit exceeds its fair value, however, a second step is required to determine the amount of the
impairment charge, if any. An impairment charge is recognized if the carrying value of a reporting unit's goodwill exceeds its implied fair value.
We perform our impairment test for our indefinite-lived intangible assets by comparing the fair value of each indefinite-lived intangible asset unit to its
carrying value. The fair value of the asset unit is estimated based on its discounted future cash flows. We recognize an impairment charge if the carrying value
of the asset unit exceeds its estimated fair value.
The annual impairment test date for our goodwill and indefinite-lived intangible assets is December 31 (see Note 5).
Interest Capitalized
We capitalize interest on advance payments for the acquisition of new aircraft and on construction of ground facilities as an additional cost of the related
assets. Interest is capitalized at our weighted average interest rate on long-term debt or, if applicable, the interest rate related to specific asset financings.
Interest capitalization ends when the equipment or facility is ready for service or its intended use. Capitalized interest totaled $12 million, $15 million and
$32 million for the years ended December 31, 2003, 2002 and 2001, respectively.
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