Delta Airlines 2015 Annual Report Download - page 71

TableofContents
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.
Wevaluegoodwillandindefinite-livedintangibleassetsprimarilyusingmarketcapitalizationandincomeapproachvaluationtechniques.Thesemeasurements
includethefollowingkeyassumptions:(1)forecastedrevenues,expensesandcashflows,(2)terminalperiodrevenuegrowthandcashflows,(3)anestimated
weightedaveragecostofcapital,(4)assumeddiscountratesdependingontheassetand(5)ataxrate.Theseassumptionsareconsistentwiththosehypothetical
marketparticipantswoulduse.Sincewearerequiredtomakeestimatesandassumptionswhenevaluatinggoodwillandindefinite-livedintangibleassetsfor
impairment,actualtransactionamountsmaydiffermateriallyfromtheseestimates.
Changesincertaineventsandcircumstancescouldresultinimpairment.Factorswhichcouldcauseimpairmentinclude,butarenotlimitedto,(1)negative
trendsinourmarketcapitalization,(2)reducedprofitabilityresultingfromlowerpassengermileyieldsorhigherinputcosts(primarilyrelatedtofueland
employees),(3)lowerpassengerdemandasaresultofweakenedU.S.andglobaleconomies,(4)interruptiontoouroperationsduetoaprolongedemployeestrike,
terroristattack,orotherreasons,(5)changestotheregulatoryenvironment(e.g.,diminishedslotrestrictionsoradditionalOpenSkiesagreements),(6)competitive
changesbyotherairlinesand(7)strategicchangestoouroperationsleadingtodiminishedutilizationoftheintangibleassets.
Goodwill.Whenweevaluategoodwillforimpairmentusingaquantitativeapproach,weestimatethefairvalueofthereportingunitbyconsideringbothmarket
capitalizationandprojecteddiscountedfuturecashflows(anincomeapproach).Ifthereportingunit'sfairvalueexceedsitscarryingvalue,nofurthertestingis
required.If,however,thereportingunit'scarryingvalueexceedsitsfairvalue,wethendeterminetheamountoftheimpairmentcharge,ifany.Werecognizean
impairmentchargeifthecarryingvalueofthereportingunit'sgoodwillexceedsitsestimatedfairvalue.
IdentifiableIntangibleAssets.Indefinite-livedassetsarenotamortizedandconsistofroutes,slots,theDeltatradenameandassetsrelatedtoSkyTeam.Definite-
livedintangibleassetsconsistprimarilyofmarketingagreementsandareamortizedonastraight-linebasisorundertheundiscountedcashflowsmethodoverthe
estimatedeconomiclifeoftherespectiveagreements.Costsincurredtoreneworextendthetermofanintangibleassetareexpensedasincurred.
Weassessourindefinite-livedassetsunderaqualitativeorquantitativeapproach.Weanalyzemarketfactorstodetermineifeventsandcircumstanceshave
affectedthefairvalueoftheindefinite-livedintangibleassets.Ifwedeterminethatitismorelikelythannotthattheassetvaluemaybeimpaired,weusethe
quantitativeapproachtoassesstheasset'sfairvalueandtheamountoftheimpairment.Weperformthequantitativeimpairmenttestforindefinite-livedintangible
assetsbycomparingtheasset'sfairvaluetoitscarryingvalue.Fairvalueisestimatedbasedon(1)recentmarkettransactions,whereavailable,(2)theroyalty
methodfortheDeltatradename(whichassumeshypotheticalroyaltiesgeneratedfromusingourtradename)or(3)projecteddiscountedfuturecashflows(an
incomeapproach).Werecognizeanimpairmentchargeiftheasset'scarryingvalueexceedsitsestimatedfairvalue.
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