Delta Airlines 2008 Annual Report Download - page 86

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
that affect our potential liability, such as lapsing of applicable statutes of limitations, conclusion of tax audits, a change in exposure based on current
calculations, identification of new issues, release of administrative guidance or the rendering of a court decision affecting a particular issue. We would adjust
the income tax provision in the period in which the facts that give rise to the revision become known.
Investments in Debt and Equity Securities
We record our investments in student loan backed auction rate securities acquired in the Merger as available-for-sale securities at fair value. Any
change in the fair value of these securities is recorded in accumulated other comprehensive (loss) income. At December 31, 2008, the fair value of our student
loan backed auction rate securities was $38 million. The cost of these investments was $45 million.
We record our investments in insured auction rate securities as trading securities at fair value. Any change in the fair value of these securities is
recorded in other (expense) income on our Consolidated Statements of Operations. At December 31, 2008 and 2007, the fair value of our insured auction rate
securities was $83 million and $107 million, respectively. The cost of these investments was $110 million.
Due to the protracted failure in the auction process and contractual maturities averaging 27 years for our insured auction rate securities and 32 years for
our student loan backed auction rate securities, we have reclassified our auction rate securities to long-term within other noncurrent assets on our Consolidated
Balance Sheet at December 31, 2008.
Because auction rate securities are not actively traded, fair values were estimated by discounting the cash flows expected to be received over the
remaining maturities of the underlying securities. The valuations are based on our assessment of observable yields on instruments bearing comparable risks
and consider the creditworthiness of the underlying debt issuer. Changes in market conditions could result in further adjustments to the fair value of these
securities.
Deferred Gains on Sale and Leaseback Transactions
We amortize deferred gains on the sale and leaseback of property and equipment under operating leases over the lives of these leases. The amortization
of these gains is recorded as a reduction to rent expense. Gains on the sale and leaseback of property and equipment under capital leases reduce the carrying
value of the related assets.
Manufacturers' Credits
We periodically receive credits in connection with the acquisition of aircraft and engines. These credits are deferred until the aircraft and engines are
delivered, and then applied on a pro rata basis as a reduction to the cost of the related equipment.
Maintenance Costs
We record maintenance costs in aircraft maintenance materials and outside repairs on our Consolidated Statements of Operations as they are incurred.
Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized and amortized over the remaining
estimated useful life of the asset or the remaining lease term, whichever is shorter.
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