SkyWest Airlines 2009 Annual Report Download - page 69

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2009
(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)
them as ‘‘Other assets’’ in the Company’s consolidated balance sheet as of December 31, 2009 (see
Note 6).
Inventories
Inventories include expendable parts, fuel and supplies and are valued at cost (FIFO basis) less an
allowance for obsolescence based on historical results and management’s expectations of future
operations. Expendable inventory parts are charged to expense as used. An obsolescence allowance for
flight equipment expendable parts is accrued based on estimated lives of the corresponding fleet types
and salvage values. The inventory allowance as of December 31, 2009 and 2008 was $6.6 million and
$5.5 million, respectively. These allowances are based on management estimates, which are subject to
change.
Property and Equipment
Property and equipment are stated at cost and depreciated over their useful lives to their
estimated residual values using the straight-line method as follows:
Depreciable Residual
Assets Life Value
Aircraft and rotable spares ....................... 10 - 18 years 0 - 30%
Ground equipment ............................. 5 - 10 years 0%
Office equipment .............................. 5 - 7 years 0%
Leasehold improvements ......................... 15 years 0%
or life of
the lease
Buildings .................................... 20 - 39.5 years 0%
Change in Accounting Estimates
During the first quarter of 2009, the Company changed its estimate of depreciable lives on ground
equipment from five to seven years to five to ten years and maintained the residual value of zero
percent. The impact of this change increased the Company’s pre-tax income for the year ended
December, 31 2009 by $4.0 million ($.07 per share Basic EPS and Diluted EPS), respectively. The
impact of this change, net of tax, increased the Company’s net income for the year ended
December 31, 2009 by $2.5 million ($.05 per share Basic EPS and $.04 per share Diluted EPS),
respectively.
Impairment of Long Lived and Intangible Assets
As of December 31, 2009, the Company had approximately $2.9 billion of property and equipment
and related assets. Additionally, as of December 31, 2009, the Company had approximately
$24.0 million in intangible assets. In accounting for these long-lived and intangible assets, the Company
makes 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. On September 7, 2005, the Company completed the acquisition of all of the issued and
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