Delta Airlines 2008 Annual Report Download - page 43

Table of Contents
Index to Financial Statements
Fuel Hedging. Prior to the adoption of fresh start reporting on April 30, 2007, we recorded as a component of stockholders' deficit in other
comprehensive loss $46 million of deferred gains related to our fuel hedging program. This gain would have been recognized as an offset to fuel expense as
the underlying fuel hedge contracts were settled. However, as required by fresh start reporting, accumulated other comprehensive loss prior to emergence
from Chapter 11 was reset to zero. Accordingly, Fresh Start Adjustments resulted in a non-cash increase to fuel expense of $46 million.
Depreciation. We revalued property and equipment to fair value, which reduced the net book value of these assets by $1.0 billion. In addition, we
adjusted the depreciable lives of flight equipment to reflect revised estimated useful lives. As a result, depreciation expense decreased by $127 million.
Amortization of Intangible Assets. We valued our intangible assets at fair value, which increased the net book value of intangible assets (excluding
goodwill) by $2.9 billion, of which $956 million relates to amortizable intangible assets. As a result, amortization expense increased by $146 million.
Aircraft Maintenance Materials and Outside Repairs. We changed the way we account for certain maintenance parts that were previously capitalized
and depreciated. After emergence, we expense these parts as they are placed on the aircraft. This change resulted in an increase in aircraft maintenance
materials and outside repairs expense of $52 million.
Interest Expense. The revaluation of our debt and capital lease obligations resulted in a decrease in interest expense due to the amortization of premiums
from adjusting these obligations to fair value. During 2007, $33 million in future premium credits were accelerated in connection with accounting for (1) an
amendment to certain financing arrangements and (2) the prepayment of certain secured debt. As a result, interest expense decreased by $70 million.
Other Fresh Start Adjustments. We recorded other Fresh Start Adjustments relating primarily to the revaluation of our aircraft leases. These
adjustments increased operating expense by $19 million and non-operating expense by $3 million.
Accounting Adjustments
During 2006, we recorded certain out-of-period adjustments ("Accounting Adjustments") in our Consolidated Financial Statements that affect the
comparability of our results for the years ended December 31, 2007 and 2006. These adjustments resulted in a net non-cash charge approximating $310
million to our Consolidated Statement of Operations for the year ended December 31, 2006, consisting of:
• A $112 million charge in landing fees and other rents. This adjustment is associated primarily with our airport facility leases at New York-JFK. It
resulted from historical differences associated with recording escalating rent expense based on actual rent payments instead of on a straight-line
basis over the lease term.
• A $108 million net charge related to the sale of mileage credits under our SkyMiles frequent flyer program. This includes an $83 million decrease
in passenger revenue, a $106 million decrease in other, net revenue, and an $81 million decrease in other operating expense. This net charge
primarily resulted from the reconsideration of our position with respect to the timing of recognizing revenue associated with the sale of mileage
credits that we expect will never be redeemed for travel.
• A $90 million charge in salaries and related costs to adjust our accrual for postemployment healthcare benefits. This adjustment is due to
healthcare payments applied to this accrual over several years, which should have been expensed as incurred.
We believe the Accounting Adjustments, considered individually and in the aggregate, are not material to our Consolidated Financial Statements for the
year ended December 31, 2006. In making this assessment, we
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