Delta Airlines 2005 Annual Report Download - page 77

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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In accordance with GAAP, we have applied American Institute of Certified Public Accountants' ("AICPA") Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"), in preparing the
Consolidated Financial Statements. SOP 90-7 requires that the financial statements, for periods subsequent to the Chapter 11 filing,
distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.
Accordingly, certain revenues, expenses (including professional fees), realized gains and losses and provisions for losses that are
realized or incurred in the bankruptcy proceedings are recorded in reorganization items, net on the accompanying Consolidated
Statements of Operations. In addition, pre-petition obligations that may be impacted by the bankruptcy reorganization process have
been classified on the Consolidated Balance Sheet at December 31, 2005 in liabilities subject to compromise. These liabilities are
reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts (see Note 1).
While operating as debtors-in-possession under Chapter 11 of the Bankruptcy Code, the Debtors may sell or otherwise dispose of
or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or otherwise as permitted in the ordinary course
of business, in amounts other than those reflected in the Consolidated Financial Statements. Moreover, a plan of reorganization could
materially change the amounts and classifications in the historical Consolidated Financial Statements.
Reclassifications
We sell mileage credits in our SkyMiles frequent flyer program to participating partners, such as credit card companies, hotels and
car rental agencies. The portion of the revenue from the sale of mileage credits that approximates the fair value of travel to be
provided is deferred. We amortize the deferred revenue on a straight-line basis over the period when transportation is expected to be
provided. For the year ended December 31, 2005, the majority of the revenue from the sale of mileage credits, including the
amortization of deferred revenue, is recorded in passenger revenue on our Consolidated Statements of Operations; the remaining
portion is recorded as other revenue. Prior to 2005, the remaining portion was classified as an offset to selling expenses. We have
reclassified prior period amounts to be consistent with the current year presentation. These reclassifications resulted in an increase to
other, net revenues as well as passenger commissions and other selling expenses of $233 million and $221 million for the years ended
December 31, 2004 and 2003, respectively. Operating and net loss did not change for any period presented. We believe this
reclassification enhances the comparability of other, net revenues, as well as passenger commissions and other selling expenses, on
our Consolidated Statements of Operations.
For the year ended December 31, 2005, we classified changes in restricted cash on our Consolidated Statement of Cash Flows as
an investing activity. Prior to 2005, we presented such changes as an operating activity. We have reclassified prior period amounts to
be consistent with the current year presentation. These reclassifications resulted in an increase to cash flows from operating activities
and a corresponding decrease to cash flows from investing activities of $115 million for the year ended December 31, 2004, and
$102 million for the year ended December 31, 2003.
We have reclassified certain other prior period amounts in our Consolidated Financial Statements to be consistent with our current
period presentation. The effect of these reclassifications is not material.
Use of Estimates
We are required to make estimates and assumptions when preparing our Consolidated Financial Statements in accordance with
GAAP. These estimates and assumptions affect the amounts reported in our financial statements and the accompanying notes. Actual
results could differ materially from those estimates.
New Accounting Standards
In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 154, "Accounting Changes and Error Corrections" ("SFAS 154").
F-15