SkyWest Airlines 2009 Annual Report Download - page 46

consolidated balance sheet and accordingly, neither a lease asset nor an obligation for future lease
payments is reflected in our consolidated balance sheets.
Impairment of Long-Lived and Intangible Assets
As of December 31, 2009, we had approximately $2.9 billion of property and equipment and
related assets. Additionally, as of December 31, 2009, we had approximately $24.0 million in intangible
assets. In accounting for these long-lived and intangible assets, we make estimates about the expected
useful lives of the assets, the expected residual values of certain of these assets, and the potential for
impairment based on the fair value of the assets and the cash flows they generate. We recorded an
intangible of approximately $33.7 million relating to the acquisition of ASA. The intangible is being
amortized over fifteen years under the straight-line method. As of December 31, 2009, we had recorded
$9.7 million in accumulated amortization expense. Factors indicating potential impairment include, but
are not limited to, significant decreases in the market value of the long-lived assets, a significant change
in the condition of the long-lived assets and operating cash flow losses associated with the use of the
long-lived assets. On a periodic basis, we evaluate whether the book value of our aircraft is impaired.
Based on the results of the evaluations, our management concluded no impairment was necessary as of
December 31, 2009. However, there is inherent risk in estimating the future cash flows used in the
impairment test. If cash flows do not materialize as estimated, there is a risk the impairment charges
recognized to date may be inaccurate, or further impairment charges may be necessary in the future.
Stock-Based Compensation Expense
We estimate the fair value of stock options as of the grant date using the Black-Scholes option
pricing model. We use historical data to estimate option exercises and employee termination in the
option pricing model. The expected term of options granted is derived from the output of the option
pricing model and represents the period of time that options granted are expected to be outstanding.
The expected volatilities are based on the historical volatility of our common stock and other factors.
Fair value
We hold certain assets that are required to be measured at fair value in accordance with United
States GAAP. We determined fair value of these assets based on the following three levels of inputs:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities.
Some of our marketable securities primarily utilize broker quotes in a
non-active market for valuation of these securities.
Level 3 — Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities,
therefore requiring an entity to develop its own assumptions.
We utilize several valuation techniques in order to assess the fair value of our financial assets and
liabilities. Our cash and cash equivalents primarily utilize quoted prices in active markets for identical
assets or liabilities.
We have valued non-auction rate marketable securities using quoted prices in active markets for
identical assets or liabilities. If a quoted price is not available, we utilize broker quotes in a non-active
market for valuation of these securities. For auction-rate security instruments, quoted prices in active
markets are no longer available. As a result, we have estimated the fair values of these securities
utilizing a discounted cash flow.
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