Delta Airlines 2003 Annual Report Download - page 87

Table of Contents
Equity Method Investments
We use the equity method to account for our investments in companies when we have significant influence but not control over the operations of the
company. Under the equity method, we initially record our investment at cost and then adjust the carrying value of the investment to recognize our
proportional share of the company's net income (loss). In addition, dividends received from the company reduce the carrying value of our investment.
In accordance with Securities and Exchange Commission Staff Accounting Bulletin (SAB) 51, "Accounting for Sales of Stock by a Subsidiary" (SAB 51), we
record SAB 51 gains (losses) as a component of shareowners' (deficit) equity on our Consolidated Balance Sheets (see Note 17).
Income Taxes
We account for deferred income taxes under the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes" (SFAS 109). Under this
method, we recognize deferred tax assets and liabilities based on the tax effects of temporary differences between the financial statement and tax bases of
assets and liabilities, as measured by current enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets when determined necessary in
accordance with SFAS 109. Deferred tax assets and liabilities are recorded net as current and noncurrent deferred income taxes on our Consolidated Balance
Sheets (see Note 10).
Investments in Debt and Equity Securities
In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115), we record our investments classified as
available-for-sale securities under SFAS 115 at fair value in other noncurrent assets on our Consolidated Balance Sheets. Any changes in the fair value of
these securities are recorded, net of tax, in accumulated other comprehensive income (loss), unless such changes are deemed to be other than temporary (see
Note 2).
We record our investments classified as trading securities under SFAS 115 at fair value in prepaid expenses and other on our Consolidated Balance Sheets and
recognize changes in the fair value of these securities in other income (expense) on our Consolidated Statements of Operations (see Note 17).
Frequent Flyer Program
We record an estimated liability for the incremental cost associated with providing free transportation under our SkyMiles frequent flyer program when a free
travel award is earned. The liability is recorded in accounts payable, deferred credits and other accrued liabilities on our Consolidated Balance Sheets. We
periodically record adjustments to this liability in other operating expenses on our Consolidated Statements of Operations based on awards earned, awards
redeemed, changes in the SkyMiles program and changes in estimated incremental costs.
Deferred Gains on Sale and Leaseback Transactions
We amortize deferred gains on the sale and leaseback of property and equipment under operating leases over the lives of these leases. The amortization of
these gains is recorded as a reduction in
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