Spirit Airlines 2015 Annual Report Download - page 68

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68
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 as a result of adoption of
ASU No. 2015-03, "Interest-Imputation of Interest," and ASU No. 2015-17, "Income Taxes." See “Notes to the Financial
Statements—2. Recent Accounting Developments” for additional information.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States
of America requires the Company's management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The Company's estimates and assumptions are based on historical experience
and changes in the business environment. However, actual results may differ from estimates under different conditions,
sometimes materially. Critical accounting policies and estimates are defined as those that both (i) are most important to the
portrayal of the Company's financial condition and results and (ii) require management's most subjective judgments. The
Company's most critical accounting policies and estimates are described below.
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. Cash and cash
equivalents are stated at cost, which approximates fair value.
Accounts Receivable
Accounts receivable primarily consist of amounts due from credit card processors associated with the sales of tickets. 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 as well as aging trends. The allowance for doubtful accounts was immaterial as of
December 31, 2015 and 2014.
In addition, the provision for doubtful accounts and write-offs for 2015, 2014 and 2013 were each immaterial.
Property and Equipment
Property and equipment is 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. Residual values for
aircraft, major spare rotable parts, avionics and assemblies are estimated to be 10%. 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.
The depreciable lives used for the principal depreciable asset classifications are:
Estimated Useful Life
Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 years
Spare rotables and flight assemblies . . . . . . . . . . . . . . . . . . . . . . 7 to 15 years
Other equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 to 7 years
Internal use software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 10 years
Capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease term
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesser of lease term or estimated useful life of the
improvement