Delta Airlines 2008 Annual Report Download - page 94

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) In evaluating our goodwill for impairment, we first compare our one reporting unit's fair value to its carrying value. We estimate the fair value of our reporting unit by considering (1) our
market capitalization, (2) any premium to our market capitalization an investor would pay for a controlling interest, (3) the potential value of synergies and other benefits that could result
from such interest, (4) market multiple and recent transaction values of peer companies and (5) projected discounted future cash flows, if reasonably estimable.
(2) We perform the impairment test for our indefinite-lived intangible assets by comparing the asset's fair value to its carrying value. Fair value is estimated based on recent market
transactions, where available, or projected discounted future cash flows.
At December 31, 2007, we had goodwill of $12.1 billion, indefinite-lived intangible assets of $2.0 billion and definite-lived intangible assets of $809
million. During the year ended December 31, 2008, we recorded non-cash impairment charges of $6.9 billion for goodwill, $314 million for indefinite-lived
intangible assets and $43 million for definite-lived intangible assets.
2007
Successor Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)(1)
Valuation
Technique
(in millions)
May 1,
2007
Expendable parts and supplies inventories $ 241 $ 241 $ — (a)(b)
Prepaid expense and other 343 343 — (a)(b)(c)
Net flight equipment and net flight equipment under capital lease 9,833 9,833 — (a)(b)
Other property and equipment 1,713 1,713 — (a)(b)
Definite-lived intangible assets(2) 956 — 956 (c)
Other noncurrent assets 856 856 — (a)(b)(c)
Debt and capital leases 6,899 6,899 — (a)(c)
SkyMiles deferred revenue(3) 3,474 — 3,474 (a)
Accounts payable and other noncurrent liabilities 405 405 — (a)(c)
(1) These valuations were based on the present value of future cash flows for specific assets derived from our projections of future revenue, expense and airline market conditions. These cash
flows were discounted to their present value using a rate of return that considers the relative risk of not realizing the estimated annual cash flows and time value of money.
(2) Intangible assets are identified by asset type in Note 5.
(3) The fair value of our SkyMiles frequent flyer award liability was determined based on the estimated price that third parties would require us to pay for them to assume the obligation for
miles expected to be redeemed under the SkyMiles Program. This estimated price was determined based on our weighted average equivalent ticket value of a SkyMiles award which is
redeemed for travel on Delta or a participating airline. The weighted average equivalent ticket value contemplates differing classes of service, domestic and international itineraries and
the carrier providing the award travel.
Successor Significant
Unobservable
Inputs (Level 3)
Valuation
Technique(in millions)
December 31,
2007
Goodwill $ 12,104 $ 12,104 (a)(b)(c)
Indefinite-lived intangible assets 1,997 1,997 (a)(c)
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