SkyWest Airlines 2013 Annual Report Download - page 51

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 Atlantic Southeast in September
2005. The intangible is being amortized over fifteen years under the straight-line method. As of
December 31, 2013, we had recorded $18.7 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.
When considering whether or not impairment of long-lived assets exists, we group similar assets
together at the lowest level for which identifiable cash flows are largely independent of the cash flows
of other assets and liabilities and compare the undiscounted cash flows for each asset group to the net
carrying amount of the assets supporting the asset group. Asset groupings are done at the fleet or
contract level. Based on the results of the evaluations performed as of December 31, 2013, our
management concluded no impairment of long-lived assets was necessary as of December 31, 2013.
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 model.
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