Delta Airlines 2007 Annual Report Download - page 108

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Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the changes to the amount of unrecognized tax benefits for the four months ended April 30, 2007 and the eight months
ended December 31, 2007:
(in millions) 2007
Unrecognized tax benefits at January 1, 2007 (Predecessor) $ 217
Balance at April 30, 2007 (Predecessor) 217
Discharge upon emergence from bankruptcy (17)
Balance at May 1, 2007 (Successor) 200
Gross increases—tax positions in prior period 25
Gross decreases—tax positions in prior period (21)
Gross increases—tax positions in current period 48
Settlements (109)
Unrecognized tax benefits at December 31, 2007 (Successor) $ 143
Valuation Allowance
SFAS 109 requires us to periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred
income tax assets. In making this determination, we consider all available positive and negative evidence and make certain assumptions. We consider, among
other things, our deferred tax liabilities, the overall business environment, our historical earnings and losses, our industry's historically cyclical periods of
earnings and losses and potential, current and future tax planning strategies. We cannot presently determine when we will be able to generate sufficient
taxable income to realize our deferred tax assets.
Upon emergence from bankruptcy, we recorded a valuation allowance of $4.8 billion on our Fresh Start Consolidated Balance Sheet. Prior to January 1,
2009, any reduction in the valuation allowance on our Fresh Start Consolidated Balance Sheet, as a result of the recognition of deferred tax assets, will be
adjusted through goodwill, followed by other indefinite-lived intangible assets until the net carrying costs of these assets is zero. Beginning January 1, 2009,
pursuant to SFAS 141R, any reduction in this valuation allowance will be reflected through the income tax provision.
Our income tax (provision) benefit for the eight months ended December 31, 2007, the four months ended April 30, 2007 and the years ended
December 31, 2006 and 2005 consisted of:
(in millions)
Successor Predecessor
Eight Months
Ended
December 31,
2007
Four Months
Ended
April 30,
2007
Year Ended
December 31,
2006 2005
Current tax benefit (provision) $ — $ — $ 17 $ (9)
Deferred tax (provision) benefit (exclusive of the other components listed below) (211) (505) 2,364 1,464
Decrease (increase) in valuation allowance — 509 (1,616) (1,414)
Income tax (provision) benefit $ (211) $ 4 $ 765 $ 41
F-48