SkyWest Airlines 2013 Annual Report Download - page 76

SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2013
(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)
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:
Assets Depreciable Life Residual 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 or life of the lease 0%
Buildings ....................... 20 - 39.5 years 0%
Impairment of Long Lived Assets
As of December 31, 2013, the Company had approximately $2.7 billion of property and equipment
and related assets. Additionally, as of December 31, 2013, the Company had approximately
$15.0 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
outstanding capital stock of Atlantic Southeast and recorded an intangible asset of approximately
$33.7 million relating to the acquisition. The intangible asset is being amortized over fifteen years
under the straight-line method. As of December 31, 2013 and 2012, the Company had $18.7 million
and $16.5 million in accumulated amortization expense, respectively. 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, the Company evaluates whether
impairment indicators are present. 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. The Company did not recognize any impairments of
long-lived assets during 2013, 2012, or 2011.
Capitalized Interest
Interest is capitalized on aircraft purchase deposits as a portion of the cost of the asset and is
depreciated over the estimated useful life of the asset. During the years ended December 31, 2013,
2012 and 2011, the Company capitalized interest costs of approximately $1.2 million, $0, and $0,
respectively.
Maintenance
The Company operates under an FAA-approved continuous inspection and maintenance program.
The Company uses the direct expense method of accounting for its regional jet engine overhauls
wherein the expense is recorded when the overhaul event occurs. The Company has an engine services
71