Delta Airlines 2006 Annual Report Download - page 77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 Consolidated Financial Statements and the accompanying notes. Actual results could differ materially
from those estimates.
New Accounting Standards
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, “Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of SFAS Nos. 87, 88, 106 and 132(R)” (“SFAS 158”). This statement, among other things, requires that we
recognize the funded status of our defined benefit pension and other postretirement plans in our Consolidated Balance Sheet as of December 31, 2006, with
changes in the funded status recognized through comprehensive loss in the year in which such changes occur. Application of this standard resulted in (1) a
$685 million net decrease in accrued pension and other postretirement and postemployment liabilities, (2) a $248 million decrease in the intangible pension
asset in other noncurrent assets and (3) a $437 million decrease in shareowners’ deficit. The adoption of SFAS 158 had no effect on our Consolidated
Statement of Operations for any period presented. For additional information regarding the impact of SFAS 158 on our Consolidated Financial Statements,
see Note 10.
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 is intended to reduce the diversity in
practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal
years beginning after December 15, 2006. The cumulative effect of applying this interpretation must be reported as an adjustment to the opening balance of
shareowners’ deficit in 2007. We are currently evaluating the impact of FIN 48 on our Consolidated Financial Statements and anticipate the adjustment to
shareowners’ deficit will not be material.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which requires an entity to recognize
compensation expense in an amount equal to the fair value of its share based payments, such as stock options granted to employees. This standard replaces
SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), and supersedes APB Opinion No. 25, “Accounting for Stock Issued to
Employees,” (“APB 25”). We adopted SFAS 123R on January 1, 2006. For additional information regarding SFAS 123R, see “Stock-Based Compensation”
in this Note.
Cash and Cash Equivalents
We classify short-term, highly liquid investments with maturities of three months or less when purchased as cash and cash equivalents. These
investments are recorded at cost, which approximates fair value. Cash and cash equivalents at December 31, 2006 and 2005 include $156 million and $155
million, respectively, which is set aside for the payment of certain operational taxes and fees to governmental authorities.
Under our cash management system, we utilize controlled disbursement accounts that are funded daily. Checks we issue, which have not been presented
for payment, are recorded in accounts payable on our Consolidated Balance Sheets. These amounts totaled zero and $66 million at December 31, 2006 and
2005, respectively.
Short-Term Investments
At December 31, 2006, our short-term investments were comprised of auction rate securities. In accordance with SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities” (“SFAS 115”), we record these investments as trading securities at fair value on our Consolidated Balance Sheets.
At December 31, 2005, we did not have any short-term investments. For additional information about our accounting for trading securities, see “Investments
in Debt and Equity Securities” in this Note.
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