Delta Airlines 2010 Annual Report Download - page 60

Table of Contents
Identifiable Intangible Assets
Identifiable intangible assets reflect intangible assets recorded as a result of our adoption of fresh start reporting upon emergence from bankruptcy and
acquired in the Merger. Indefinite-lived assets are not amortized. Definite-lived intangible assets are amortized on a straight-line basis or under the
undiscounted cash flows method over the estimated economic life of the respective agreements and contracts. Costs incurred to renew or extend the term of an
intangible asset are expensed as incurred.
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 (1) recent market transactions, where available, (2) the lease savings method for certain airport slots (which reflects potential lease savings from
owning the slots rather than leasing them from another airline at market rates), (3) the royalty method for the Delta tradename (which assumes hypothetical
royalties generated from using our tradename) or (4) projected discounted future cash flows. We recognize an impairment charge if the asset's carrying value
exceeds its estimated fair value.
Income Taxes
We account for deferred income taxes under the liability method. We recognize deferred tax assets and liabilities based on the tax effects of temporary
differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. A valuation allowance is recorded
to reduce deferred tax assets when necessary. Deferred tax assets and liabilities are recorded net as current and noncurrent deferred income taxes on our
Consolidated Balance Sheets.
Our income tax provisions are based on calculations and assumptions that are subject to examination by the Internal Revenue Service (the "IRS") and other
taxing authorities. Although the positions we have taken on previously filed tax returns are reasonable, we have established tax and interest reserves in
recognition that taxing authorities may challenge these positions, which could result in additional liabilities for taxes and interest. We review and adjust the
reserves as circumstances warrant and events occur, 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
adjust the income tax provision in the period in which the facts that give rise to the revision become known.
Long-Term Investments
Investments with maturities of greater than one year when purchased are recorded at fair value in other noncurrent assets on our Consolidated Balance
Sheets. Our long-term investments are comprised of student loan backed auction rate securities classified as available-for-sale and insured auction rate
securities classified as trading securities. Any change in the fair value of these securities is recorded in accumulated other comprehensive loss or earnings, as
appropriate. For additional information regarding our auction rate securities, see Note 2.
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 to aircraft maintenance materials and outside repairs on our Consolidated Statements of Operations. Maintenance costs are
expensed as incurred, except for costs incurred under power-by-the-hour contracts, which are expensed based on actual hours flown. Power-by-the-hour
contracts transfer certain risk to third party service providers and fix the amount we pay per flight hour to the service provider in exchange for maintenance
and repairs under a predefined maintenance program. 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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