Delta Airlines 2004 Annual Report Download - page 74

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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Advertising Costs
We expense advertising costs as other selling expenses in the year incurred. Advertising expense was $148 million, $135 million and $130 million for the
years ended December 31, 2004, 2003 and 2002, respectively.
Commissions
We record passenger commissions in prepaid expenses and other on our Consolidated Balance Sheets when the related passenger tickets are sold.
Passenger commissions are recognized in operating expenses on our Consolidated Statements of Operations when the transportation is provided and the
related revenue is recognized.
Foreign Currency Remeasurement
We remeasure assets and liabilities denominated in foreign currencies using exchange rates in effect on the balance sheet date. Fixed assets and the related
depreciation or amortization charges are recorded at the exchange rates in effect on the date we acquired the assets. Revenues and expenses denominated in
foreign currencies are measured using average exchange rates for each of the periods presented. We recognize the resulting foreign exchange gains (losses) as
a component of miscellaneous income (expense) on our Consolidated Statements of Operations. These gains (losses) are immaterial for all periods presented.
Stock-Based Compensation
We account for our stock-based compensation plans under the intrinsic value method in accordance with APB 25 and related interpretations (see Note 11
for additional information about our stock-based compensation plans). No stock option compensation expense is recognized in our Consolidated Statements of
Operations because all stock options granted had an exercise price equal to the fair value of the underlying common stock on the grant date.
The estimated fair values of stock options granted during the years ended December 31, 2004, 2003 and 2002 were derived using the Black-Scholes
model. The following table includes the assumptions used in estimating fair values and the resulting weighted average fair value of a stock option granted in
the periods presented:
Stock Options Granted
Assumption 2004 2003 2002
Risk-free interest rate 3.1% 2.2% 4.4%
Average expected life of stock options (in years) 3.2 2.9 6.7
Expected volatility of common stock 68.8% 66.4% 38.9%
Expected annual dividends on common stock $ — $ — $ 0.10
Weighted average fair value of a stock option granted $ 3 $ 5 $ 9
F-17