Delta Airlines 2014 Annual Report Download - page 64

Presentation of Comprehensive Income
In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income." The standard revises the presentation and prominence of
the items reported in other comprehensive income and is effective retrospectively for fiscal years beginning after December 15, 2011. We adopted this
standard in 2012 and have presented comprehensive income in our Consolidated Statements of Comprehensive (Loss) Income.
Cash and Cash Equivalents and Short-Term Investments
Short-term, highly liquid investments with maturities of three months or less when purchased are classified as cash and cash equivalents.
Investments with maturities of greater than three months, but not in excess of one year, when purchased are classified as short-term investments.
Investments with maturities beyond one year when purchased may be classified as short-term investments if they are expected to be available to
support our short-term liquidity needs. All short-term investments are classified as either available-for-sale or held-to-maturity and realized gains and
losses are recorded using the specific identification method.
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 was not material in any period presented.
Inventories
Spare Parts. Inventories of expendable parts related to flight equipment, which cannot be economically repaired, reconditioned or reused after
removal from the aircraft, are carried at moving average cost and charged to operations as consumed. An allowance for obsolescence is provided over
the remaining useful life of the related fleet. We also provide allowances for parts identified as excess or obsolete to reduce the carrying costs to the
lower of cost or net realizable value. These parts are assumed to have an estimated residual value of 5% of the original cost.
Refinery. Refined product, feedstock and blendstock inventories, all of which are finished goods, are carried at recoverable cost. We use jet fuel
produced by the refinery and procured through the exchange with third parties of gasoline, diesel and other refined products ("non-jet fuel products")
the refinery produces in our airline operations. Cost is determined using the first-in, first-out method. Costs include the raw material consumed plus
direct manufacturing costs (such as labor, utilities and supplies) as incurred and an applicable portion of manufacturing overhead.
Accounting for Refinery Related Buy/Sell Agreements
To the extent that we receive jet fuel for non-
jet fuel products exchanged under buy/sell agreements, we account for these transactions as
nonmonetary exchanges. We have recorded these nonmonetary exchanges at the carrying amount of the non-
jet fuel products transferred within
aircraft fuel and related taxes on the Consolidated Statements of Operations.
Derivatives
Changes in aircraft fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our
exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change. We recognize derivative
contracts at fair value on our Consolidated Balance Sheets.
Not Designated as Accounting Hedges.
We do not designate our fuel derivative contracts as accounting hedges. We record changes in the fair value
of our fuel hedges in aircraft fuel and related taxes. These changes in fair value include settled gains and losses as well as mark-to-market adjustments
("MTM adjustments"). MTM adjustments are based on market prices at the end of the reporting period for contracts settling in future periods.
57