Frontier Airlines 2004 Annual Report Download - page 54

Inventories consist primarily of spare parts and supplies, which are charged to expense as they are used in operations. Inventories are valued at average cost.
Aircraft and Other Equipment
are carried at cost. Incentives received from the aircraft manufacturer are recorded as reductions to the cost of the aircraft. Depreciation for aircraft is
computed on a straight - line basis to an estimated salvage value over 16.5 years, the estimated useful life of the aircraft. Depreciation for other equipment, including rotable parts, is computed on a
straight - line basis over 3 to 10 years, the estimated useful lives of the other equipment. Leasehold improvements are amortized over the expected life or lease term, whichever is less. Interest
related to deposits on aircraft on firm order from the manufacturer is capitalized. Chautauqua capitalized approximately $1,692, $434 and $263 of interest for the years ended December 31,
2004, 2003 and 2002, respectively.
Restricted Cash
consists of restricted amounts for satisfying future debt and lease payments.
Debt Issue Costs
are capitalized and included in other assets and are amortized, using the effective interest method, to interest expense over the term of the related debt. Debt issue
costs, net of accumulated amortization, of $8,048 and $4,957, are included in other assets in the consolidated balance sheets as of December 31, 2004 and 2003, respectively.
Goodwill
is accounted for in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and management makes annual assessments of impairment. The carrying value
of goodwill was reviewed by management on January 1, 2004 (the annual assessment date) and concluded that no asset impairment existed as of December 31, 2004 or 2003.
Long
- Lived Assets— Management reviews long - lived assets for possible impairment, if there is a significant event that detrimentally affects operations. The primary financial indicator
used by the Company to assess the recoverability of its long - lived assets held and used is undiscounted future cash flows from operations. The amount of impairment, if any, is measured based
on estimated fair value or projected future cash flows using a discount rate reflecting the Company's average cost of funds. Certain long - lived assets held for sale are recorded at estimated fair
value less costs to sell.
Deferred Credits
consist of credits for parts and training from the aircraft and engine manufacturers and deferred gains from the sale and leaseback of aircraft and spare jet engines.
Deferred credits are amortized on a straight - line basis as a reduction of aircraft or engine rent expense over the term of the respective leases.
Comprehensive Income—
Republic reports comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting
and displaying comprehensive income and its components in financial statements. Republic had accumulated other comprehensive loss relating to treasury lock agreements of $4,168, net of tax,
at December 31, 2004. There were no other comprehensive income components for the years ended December 31, 2003 or 2002.
Income Taxes—
Republic accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The
measurement of deferred tax assets is adjusted by a valuation allowance, if necessary, to recognize the future tax benefits to the extent, based on available evidence, it is more likely than not they
will be realized.
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