Delta Airlines 2008 Annual Report Download - page 91

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of three valuation techniques noted in SFAS 157. The three valuation techniques
are identified in the tables below. Where more than one technique is noted, individual assets or liabilities were valued using one or more of the noted
techniques. The valuation techniques are as follows:
(a) Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
(b) Cost approach. Amount that would be required to replace the service capacity of an asset (replacement cost).
(c) Income approach. Techniques to convert future amounts to a single present amount based on market expectations (including present value
techniques, option-pricing and excess earnings models).
Assets and Liabilities Measured at Fair Value on a Recurring Basis
(in millions)
December 31,
2008
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Valuation
Technique
Cash equivalents $ 4,020 $ 4,020 $ — $ — (a)
Short-term investments 212 — — 212 (c)
Restricted cash equivalents 128 128 — — (a)
Long-term investments 121 — — 121 (c)
Hedge derivatives liability, net (1,109) — (18) (1,091) (a)(c)
Due to uncertainty regarding the timing of the distribution of our current holdings in the Primary Fund and the amount we will receive from the
distribution, we changed our valuation technique for the Primary Fund to an income approach using a discounted cash flow model during the September 2008
quarter. Accordingly, our short-term investments at December 31, 2008, comprised of these securities, changed from Level 1 to Level 3 within SFAS 157's
three-tier fair value hierarchy since initial valuation upon acquisition earlier in 2008.
Our fuel hedge option derivative contracts are valued under the income approach using option-pricing models. During 2008, we reevaluated the
valuation inputs used for our option contracts. As a result, we reclassified these contracts from Level 2 to Level 3 within SFAS 157's three-tier fair value
hierarchy since valuation at December 31, 2007.
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