JetBlue Airlines 2003 Annual Report Download - page 59

JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2003
Note 1—Summary of Significant Accounting Policies (Continued)
Estimated useful lives and residual values for our property and equipment are as follows:
Estimated Useful Life Residual Value
Aircraft ................................... 25 years 20%
In-flight entertainment systems .................. 12 years 0%
Aircraft parts ............................... Fleet life 10%
Flight equipment leasehold improvements .......... Lease term 0%
Ground property and equipment ................. 3-10 years 0%
Leasehold improvements ...................... 15 years or lease term 0%
We record impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets may be impaired and the undiscounted future cash flows
estimated to be generated by these assets are less than the assets’ net book value. If impairment occurs,
the loss is measured by comparing the fair value of the asset to its carrying amount.
Passenger Revenues: Passenger revenue is recognized when the transportation is provided or after
the ticket or customer credit (issued upon payment of a change fee) expires. Tickets sold but not yet
recognized as revenue and unexpired credits are included in air traffic liability.
LiveTV Revenues and Expenses: We account for LiveTV’s revenues and expenses related to the
sale of hardware, maintenance of hardware, and programming services provided, as a single unit in
accordance with Emerging Issues Task Force Issue No. 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. Revenues and expenses related to these components are recognized ratably over
the service periods which currently extend through 2014. Customer advances are included in other
liabilities.
Aircraft Maintenance and Repair: Regular airframe maintenance and engine overhauls for owned
and leased flight equipment are charged to expense as incurred.
Advertising Costs: Advertising costs, which are included in sales and marketing, are expensed as
incurred. Advertising expense in 2003, 2002 and 2001 was $25.8 million, $24.1 million and $15.6 million,
respectively.
Loyalty Program: We account for our customer loyalty program, TrueBlue Flight Gratitude, by
recording a liability for the estimated incremental cost for points outstanding and awards we expect to
be redeemed. We adjust this liability, which is included in air traffic liability, based on points earned
and redeemed as well as changes in the estimated incremental costs.
Income Taxes: We account for income taxes utilizing the liability method. Deferred income taxes
are recognized for the tax consequences of temporary differences between the tax and financial
statement reporting bases of assets and liabilities. A valuation allowance for net deferred tax assets is
provided unless realizability is judged by us to be more likely than not.
Stock-Based Compensation: We account for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Compensation expense for a stock option grant is recognized if the exercise price is less
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