Delta Airlines 2013 Annual Report Download - page 73
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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 primarily support letters of credit that
meet certain projected self-
insurance obligations and airport commitments 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.
65
•
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,
2013 Level 1 Level 2 Level 3 Valuation
Technique
Cash equivalents
$
2,487
$
2,487
$
—
$
—
(a)
Short-term investments
959
959
—
—
(a)
Restricted cash equivalents and investments
118
118
—
—
(a)
Long-term investments
109
80
29
—
(a)(b)
Hedge derivatives, net
Fuel hedge contracts
314
16
298
—
(a)(b)
Interest rate contracts
(67
)
—
(
67
)
—
(a)(b)
Foreign currency exchange contracts
257
—
257
—
(a)
(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)
(1)
See Note 11 , “Employee Benefit Plans”,
for fair value of benefit plan assets.