Spirit Airlines 2013 Annual Report Download - page 63

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Notes to Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
Spirit Airlines, Inc. (Spirit or the Company) headquartered in Miramar, Florida, is an ultra low-cost, low-fare airline that
provides affordable travel opportunities principally throughout the domestic United States, the Caribbean and Latin America.
The Company manages operations on a system-wide basis due to the interdependence of its route structure in the various
markets served. As only one service is offered (i.e., air transportation), management has concluded there is only one reportable
segment.
Certain prior period amounts have been reclassified to conform to the current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States
of America requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of less than three months at the date of acquisition
to be cash equivalents. Investments included in this category primarily consist of money market funds.
Restricted Cash
Restricted cash, when reported, can consist of funds held by credit card processors as collateral for future travel paid with
a credit card.
Accounts Receivable
Accounts receivable primarily consist of amounts due from credit card processors associated with the sales of tickets and
amounts due from counterparties associated with fuel derivative instruments which have settled. The Company records an
allowance for doubtful accounts for amounts not expected to be collected. The Company estimates the allowance based on
historical write offs and chargebacks as well as aging trends. The allowance for doubtful accounts was immaterial as of
December 31, 2013, 2012 and 2011.
In addition, the provision for doubtful accounts and write-offs for 2013, 2012 and 2011 were each immaterial.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of operating
property and equipment is computed using the straight-line method applied to each unit of property, except on flight equipment
(major rotable parts, avionics and assemblies), which are depreciated on a group basis over the average life of the applicable
equipment. Property under capital leases and related obligations are initially recorded at an amount equal to the present value of
future minimum lease payments computed using the Company's incremental borrowing rate or, when known, the interest rate
implicit in the lease. Amortization of property under capital leases is on a straight-line basis over the lease term and is included
in depreciation and amortization expense. During 2012, the Company wrote off approximately $15.3 million in fully
depreciated and out-of-service assets and recorded a corresponding entry to accumulated depreciation.
The depreciable lives used for the principal depreciable asset classifications are:
Estimated Useful Life
Spare rotables and flight assemblies . . . . . . . . . . . . . . . . . . . . . . Lesser of the useful life of equipment or average remaining
fleet life
Other equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 to 7 years
Internal use software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 10 years
Capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease term
All aircraft and spare engines are financed through operating leases with terms of 3 to 15 years for aircraft and 7 to 12
years for spare engines. Residual values for major spare rotable parts, avionics and assemblies are estimated to be 10%.