Delta Airlines 2010 Annual Report Download - page 55

Table of Contents
Recent Accounting Standards
In October 2009, the Financial Accounting Standards Board issued "Revenue Arrangements with Multiple Deliverables." The standard revises guidance on
the determination of when individual deliverables may be treated as separate units of accounting and the allocation of consideration among separately
identified deliverables. It also expands disclosure requirements regarding an entity's multiple element revenue arrangements. The standard is effective for
fiscal years beginning on or after June 15, 2010.
We adopted this standard on a prospective basis beginning January 1, 2011. The adoption of this standard did not have a material impact on our
Consolidated Financial Statements, although it could significantly impact our future financial results as we enter into new or materially modified revenue
arrangements related to our frequent flier program ("SkyMiles Program").
Cash and Cash Equivalents
Short-term, highly liquid investments with maturities of three months or less when purchased are classified as cash and cash equivalents on our
Consolidated Balance Sheets and are recorded at cost, which approximates fair value.
Short-Term Investments
Investments with maturities of greater than three months, but not in excess of one year, when purchased are classified as short-term investments on our
Consolidated Balance Sheets. At December 31, 2010, our short-term investments are treasury bills recorded at cost, which approximates fair value. At
December 31, 2009, our short-term investments were invested in a money market fund that was recorded at fair value and liquidated in an orderly manner in
2010. See Note 2.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents on our Consolidated Balance Sheets are primarily held to meet certain projected self-insurance obligations and are
recorded at cost, which approximates fair value.
Accounts Receivable
Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger airline tickets, customers of our aircraft
maintenance and cargo transportation services and other companies for the purchase of mileage credits under our SkyMiles Program. We provide an
allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other
specific analyses. Bad debt expense and write-offs were not material for the years ended December 31, 2010, 2009 and 2008.
Derivative Financial Instruments
Our results of operations are significantly impacted by changes in aircraft fuel prices, interest rates and foreign currency exchange rates. In an effort to
manage our exposure to these risks, we periodically enter into derivative instruments, including fuel, interest rate and foreign currency hedges. We recognize
derivative instruments at fair value on our Consolidated Balance Sheets and recognize certain changes in the fair value of derivative instruments on our
Consolidated Statements of Operations.
We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our derivative instruments designated as hedges,
including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge
accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings. As a result of our effectiveness assessment at December
31, 2010, we believe our derivative instruments designated as hedges will continue to be highly effective in offsetting changes in cash flow attributable to the
hedged risk.
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