US Airways 2004 Annual Report Download - page 84

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(o) New Accounting Standards
In November 2004, the FASB issued Revised Statement No. 123, "Accounting for Share-Based Payment" ("SFAS No. 123R"). This statement requires
AWA to recognize the grant-date fair value of stock options in the Statement of Operations. In addition, AWA will be required to calculate this compensation
using the fair-value based method, versus the intrinsic value method previously allowed under SFAS No. 123. This revision is effective for periods beginning
after June 15, 2005. Accordingly, AWA will adopt this revised SFAS effective July 1, 2005. AWA is currently evaluating how it will adopt SFAS No. 123R
and has not determined the method it will use to value granted stock options. The adoption of SFAS No. 123R is expected to have a material effect on AWA's
results of operations. See Note 1, "Summary of Significant Accounting Policies" (m) "Stock Options" for AWA's disclosure of the impact of the compensation
cost associated with stock options under SFAS No. 123.
(p) Use of Estimates
Management of AWA has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States. Actual
results could differ from those estimates.
(q) Reclassifications
Certain reclassifications have been made to the prior years' consolidated financial statements to conform to the current year's presentation.
AWA reclassified amounts related to settled fuel hedge transactions and mark-to-market adjustments on open hedge instruments from "Aircraft Fuel"
expense to "Gain (Loss) on Derivative Instruments, Net" in the accompanying consolidated statement of operations. In fiscal years 2004 and 2003, such
amounts reduced fuel expense while in fiscal years 2002 and 2001, such amounts increased fuel expense, as originally classified. The amounts reclassified are
as follows:
Fiscal Year Amounts Reclassified
(in thousands)
2004 $ 30,529
2003 10,746
2002 (656)
2. Restatement of Previously Reported Amounts
Derivative Instruments
In February 2005, management undertook a review of AWA's accounting for its fuel hedging transactions. As a result of this review, management concluded
that AWA's hedging transactions did not qualify for hedge accounting under U.S. generally accepted accounting principles. Accordingly, management
concluded that the financial statements for prior periods required restatement to reflect the fair value of fuel hedging contracts in the balance sheets and
statements of stockholders equity and comprehensive income of Holdings and AWA. Specifically, (i) AWA has restated its balance sheet and statement of
stockholder's equity and comprehensive income as of and for the year ended December 31, 2003, and (ii) AWA has restated its 2004 and 2003 interim
financial results to correct the aforementioned accounting errors. The unaudited interim results as originally reported and as restated are presented in Note 15,
"Quarterly Financial Data (Unaudited)." AWA restated its 2003 consolidated balance sheet to reduce the carrying value of its derivative instruments asset by
$12.5 million, which served to record the asset at fair value of open contracts as of December 31, 2003. The restatement also eliminated $12.5 million in
accumulated other comprehensive income, $2.0 million of which was previously recorded in the 2003 beginning balance of accumulated other comprehensive
income. The restated amount of other assets is $110.2 million in the accompanying 2003 consolidated balance sheet. The restatement eliminates the balance in
accumulated other comprehensive income in the accompanying 2003 consolidated balance sheet and consolidated statement of stockholder's equity and
comprehensive income.
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