Delta Airlines 2010 Annual Report Download - page 62

Table of Contents
NOTE 2. FAIR VALUE MEASUREMENTS
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. Fair value is a market-based measurement that is determined based on assumptions market participants would use in pricing an
asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
• Level 1. Observable inputs such as quoted prices in active markets;
• Level 2. Inputs, other than 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 identified in the tables below. 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); and
(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 (Liabilities) Measured at Fair Value on a Recurring Basis
December 31, Valuation
(in millions) 2010 Level 1 Level 2 Level 3 Technique
Cash equivalents $ 2,696 $ 2,696 $ — $ — (a)
Short-term investments 718 718 — — (a)
Restricted cash equivalents and short-term investments 440 440 — — (a)
Long-term investments 144 — 25 119 (a)(c)
Hedge derivatives, net
Fuel derivatives 351 — 351 — (a)(c)
Interest rate derivatives (74) — (74) — (a)(c)
Foreign currency derivatives (96) — (96) — (a)
December 31, Valuation
(in millions) 2009 Level 1 Level 2 Level 3 Technique
Cash equivalents $ 4,335 $ 4,335 $ — $ — (a)
Short-term investments 71 — — 71 (c)
Restricted cash equivalents and short-term investments 435 435 — — (a)
Long-term investments 129 — — 129 (c)
Hedge derivatives, net
Fuel derivatives 176 — 176 — (a)(c)
Interest rate derivatives (45) — (45) — (a)(c)
Foreign currency derivatives (23) — (23) — (a)
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