Delta Airlines 2006 Annual Report Download - page 88

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Self-Insurance Risk
We self-insure a portion of our losses from claims related to workers’ compensation, environmental issues, property damage, medical insurance for
employees and general liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred, using independent actuarial
reviews based on standard industry practices and our historical experience. A portion of our projected workers’ compensation liability is secured with
restricted cash collateral (see Note 2).
Equity Warrants and Other Similar Rights
We own equity warrants and other similar rights in certain companies, primarily Republic Holdings and priceline. The fair value of these rights were $53
million and $37 million at December 31, 2006 and 2005, respectively. The fair value gain (loss) adjustment of equity rights totaled $16 million, $1 million,
and $(3) million for the years ended December 31, 2006, 2005, and 2004 respectively. For additional information about our accounting policy for and
ownership of these rights, respectively, see Notes 2 and 3.
Note 5. Goodwill and Other Intangible Assets
The following table includes the components of goodwill at December 31, 2006, 2005 and 2004, and impairment charges recorded during 2004:
Reporting Unit
(in millions) Mainline ASA Comair Total
Balance at January 1, 2004 $ 227 $ 498 $ 1,367 $ 2,092
Impairment charge — (498) (1,367) (1,865)
Balance at December 31, 2006, 2005 and 2004 $ 227 $ — $ — $ 227
During 2004, we re-evaluated the estimated fair values of our reporting units (Mainline, Atlantic Southeast Airlines, Inc. (“ASA”) and Comair) in light
of the implementation of initiatives intended to strengthen our competitive position and the completion of our new long-range cash flow plans. These actions
reflected, among other things, (1) the strategic role of ASA and Comair in our business (see Note 11 for information about our sale of ASA in 2005), (2) the
projected impact of changes to our fare structure on the revenues of each of our reporting units and (3) an expectation of the continuation of historically high
fuel prices. These factors had a substantial negative impact on the impairment test results for ASA and Comair. Accordingly, we recorded an impairment
charge for the full value of goodwill at ASA and Comair.
Our goodwill impairment test for Mainline as of December 31, 2006, 2005, and 2004 resulted in no impairment.
The following table presents information about our intangible assets, other than goodwill, at December 31:
2006 2005
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Definite-lived intangible assets:
Operating rights $ 121 $ (104) $ 125 $ (103)
Other 3 (3) 3 (3)
Total $ 124 $ (107) $ 128 $ (106)
(in millions)
Net
Carrying
Amount
Net
Carrying
Amount
Indefinite-lived intangible assets:
International routes and slots $ 71 $ 51
Other 1 1
Total $ 72 $ 52
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