Delta Airlines 2014 Annual Report Download - page 68

Long
-Lived Assets
The following table summarizes our property and equipment:
(1)
Includes accumulated amortization for flight and ground equipment under capital leases in the amount of $767 million and $657 million at December 31, 2014 and 2013 , respectively.
We record property and equipment at cost and depreciate or amortize these assets on a straight-line basis to their estimated residual values over
their estimated useful lives. The estimated useful life for leasehold improvements is the shorter of lease term or estimated useful life. Depreciation and
amortization expense related to our property and equipment was $1.7 billion , $1.6 billion and $1.5 billion for each of the years ended December 31,
2014 , 2013 and 2012 , respectively. Residual values for owned aircraft, engines, spare parts and simulators are generally 5% to 10% of cost.
We capitalize certain internal and external costs incurred to develop and implement software, and amortize those costs over an estimated useful life
of three to seven years. Included in the depreciation and amortization expense discussed above, we recorded $129 million , $110 million and $76
million for amortization of capitalized software for the years ended December 31, 2014 , 2013 and 2012 , respectively. The net book value of these
assets totaled $411 million and $383 million at December 31, 2014 and 2013 , respectively.
We record impairment losses on flight equipment and other long-lived assets used in operations when events and circumstances indicate the assets
may be impaired and the estimated future cash flows generated by those assets are less than their carrying amounts. Factors which could cause
impairment include, but are not limited to, (1) a decision to permanently remove flight equipment or other long-lived assets from operations, (2)
significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair
values and (5) changes to the regulatory environment. For long-lived assets held for sale, we discontinue depreciation and record impairment losses
when the carrying amount of these assets is greater than the fair value less the cost to sell.
To determine whether impairments exist for aircraft used in operations, we group assets at the fleet-type level (the lowest level for which there are
identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other
relevant factors. If an impairment occurs, the impairment loss recognized is the amount by which the fleet's carrying amount exceeds its estimated fair
value. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.
Goodwill and Other Intangible Assets
Our goodwill and identifiable intangible assets relate to the airline segment. We apply a fair value-based impairment test to the carrying value of
goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment
loss may have been incurred, on an interim basis. We assess the value of our goodwill and indefinite-lived assets under either a qualitative or
quantitative approach. Under a qualitative approach, we consider various market factors, including the key assumptions listed below. We analyze these
factors to determine if events and circumstances have affected the fair value of goodwill and indefinite-
lived intangible assets. If we determine that it is
more likely than not that the asset may be impaired, we use the quantitative approach to assess the asset's fair value and the amount of the impairment.
Under a quantitative approach, we calculate the fair value of the asset using the key assumptions listed below. If the asset's carrying value exceeds its
fair value calculated using the quantitative approach, we will record an impairment charge for the difference in fair value and carrying value.
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December 31,
(in millions, except for estimated useful life) Estimated Useful Life 2014 2013
Flight equipment 21-30 years
$
24,313
$
23,373
Ground property and equipment 3-40 years
5,198
4,596
Flight and ground equipment under capital leases Shorter of lease term or estimated useful life
1,141
1,296
Advance payments for equipment
617
381
Less: accumulated depreciation and amortization
(1)
(9,340
)
(7,792
)
Total property and equipment, net
$
21,929
$
21,854