Delta Airlines 2012 Annual Report Download - page 71

NOTE 3 . 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 that market participants
would use in pricing an asset or liability.
Assets and liabilities measured at fair value are based on the valuation techniques identified in the tables below. The valuation techniques are as
follows:
Assets (Liabilities) Measured at Fair Value on a Recurring Basis
(1)
Cash Equivalents, Short-term Investments and Restricted Cash Equivalents and Investments. Cash equivalents and short-term investments
generally consist of money market funds and treasury bills. Restricted cash equivalents and investments are primarily held to meet certain projected
self-insurance obligations and generally consist of money market funds and time deposits. These investments are recorded at cost, which
approximates fair value. Fair value is based on a market approach using prices and other relevant information generated by market transactions
involving identical or comparable assets.
64
•
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.
(a)
Market approach
. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
and
(b)
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).
(in millions) December 31, 2012 Level 1 Level 2 Level 3 Valuation Technique
Cash equivalents
$
2,176
$
2,176
$
—
$
—
(a)
Short-term investments
958
958
—
—
(a)
Restricted cash equivalents and investments
344
344
—
—
(a)
Long-term investments
208
100
27
81
(a)(b)
Hedge derivatives, net
Fuel hedge contracts
249
27
222
—
(a)(b)
Interest rate contracts
(66
)
—
(
66
)
—
(a)(b)
Foreign currency exchange contracts
123
—
123
—
(a)
(in millions) December 31, 2011 Level 1 Level 2 Level 3 Valuation Technique
Cash equivalents
$
2,357
$
2,357
$
—
$
—
(a)
Short-term investments
958
958
—
—
(a)
Restricted cash equivalents and investments
341
341
—
—
(a)
Long-term investments
188
55
24
109
(a)(b)
Hedge derivatives, net
Fuel hedge contracts
70
—
70
—
(a)(b)
Interest rate contracts
(91
)
—
(
91
)
—
(a)(b)
Foreign currency exchange contracts
(89
)
—
(
89
)
—
(a)
(1)
See Note 11, “Employee Benefit Plans”, for fair value of benefit plan
assets.