Delta Airlines 2008 Annual Report Download - page 113

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 year ended December 31, 2008, the eight months ended
December 31, 2007 and the four months ended April 30, 2007:
(in millions)
Unrecognized tax benefits at April 30, 2007 (Predecessor) and January 1, 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
Gross increases-tax positions in prior period 2
Gross decreases-tax positions in prior period (91)
Settlements (25)
Unrecognized tax benefits at December 31, 2008 (Successor) $ 29
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. On the Closing
Date of the Merger in accordance with purchase accounting, we recorded a valuation allowance of $2.7 billion related to Northwest deferred tax assets. Prior
to January 1, 2009, any reduction in the valuation allowance as a result of the recognition of deferred tax assets is 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 benefit (provision) for the year ended December 31, 2008, the eight months ended December 31, 2007, the four months ended April 30,
2007 and the year ended December 31, 2006 consisted of:
Successor Predecessor
(in millions)
Year Ended
December 31,
2008
Eight Months
Ended
December 31,
2007
Four Months
Ended
April 30,
2007
Year Ended
December 31,
2006
Current tax benefit $ — $ — $ — $ 17
Deferred tax benefit (provision) exclusive of the other components listed below) 866 (211) (505) 2,364
(Increase) decrease in valuation allowance (747) — 509 (1,616)
Income tax benefit (provision) $ 119 $ (211) $ 4 $ 765
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