US Airways 2005 Annual Report Download - page 144

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
Composition of Deferred Tax Items:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31, the significant components of US Airways Group's deferred tax assets and
liabilities are a result of the temporary differences related to the items described as follows (in millions):
2005 2004
Deferred tax assets:
Net operating loss carryforwards $ 569 $ 184
Aircraft leases 13 14
Employee benefits 296 13
Frequent flyer accrual 4 7
Restructuring and other reserves 3 4
Tax credit carryforwards 25 1
Other 193 3
Gross deferred tax assets 1,103 226
Deferred tax liabilities:
Accelerated depreciation and amortization (391) (95)
Aircraft leases (27) —
Sales lease back transactions (142) —
Other (128) (2)
Gross deferred tax liabilities (688) (97)
Net deferred tax assets before valuation allowance 415 129
Less valuation allowance (446) (129)
Net deferred liability $ (31) $ —
SFAS No. 109, "Accounting for Income Taxes," ("SFAS 109") requires that a valuation allowance be established when it is "more likely than not" that all
or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including US Airways
Group's performance, the market environment in which the Company operates, forecasts of future profitability, the utilization of past tax credits, length of
carryforward periods and similar factors. SFAS 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative
evidence such as cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment.
The Company was in a cumulative loss position three out of four years between December 31, 2002 through December 31, 2005, which weighed heavily
in the overall determination that a valuation allowance was needed. The Company expects to continue to record a full valuation allowance on any future tax
benefits until it has achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability. As of December 2005
and 2004, the valuation allowance totaled $446 million and $129 million, respectively.
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