US Airways 2005 Annual Report Download - page 177

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
Certain prior year amounts have been reclassified to conform with the 2005 presentation. In the first quarter of 2005, AWA changed its method of
reporting for its regional alliance agreement with Mesa Airlines ("Mesa") from the net basis of presentation to the gross basis of presentation. See also Note 4,
"Change in Method of Reporting for America West Express Results and Other Reclassifications."
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The
principal areas of judgment relate to impairment of long-lived assets and intangible assets, passenger revenue recognition and the frequent traveler program.
(c) Cash, Cash Equivalents and Short-term Investments
Cash equivalents consist of all highly liquid debt instruments purchased with original maturities of three months or less. Short-term investments consist of
cash invested in certain debt securities with original maturities greater than 90 days and less than one year. Investments in auction rate securities are classified
as short-term investments on the accompanying consolidated balance sheets.
Debt securities are classified as "held to maturity" in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"). Held to maturity investments are carried at amortized cost which approximates fair value.
The Company classifies auction rate securities as "available-for-sale" in accordance with SFAS 115. Cash equivalents are stated at cost, which
approximates fair value due to the highly liquid nature and short maturities of the underlying securities.
(d) Restricted Cash
Restricted cash includes cash deposits securing certain letters of credit and surety bonds and cash deposits held by institutions that process credit card sales
transactions. Restricted cash is stated at cost, which approximates fair value.
(e) Materials and supplies, net
Inventories of materials and supplies are valued at the lower of cost or fair value. Costs are determined using average costing methods. An allowance for
obsolescence is provided for flight equipment expendable and repairable parts.
(f) Property and Equipment
Property and equipment is stated at cost. Interest expenses related to the acquisition of certain property and equipment are capitalized as an additional cost
of the asset or as a leasehold improvement if the asset is leased. Interest capitalized for the years ended December 31, 2005, 2004 and 2003 was $3 million,
$2 million and $2 million, respectively. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease
term, whichever is less, using the straight-line method. Costs of major improvements that enhance the usefulness of the asset are capitalized and depreciated
over the estimated useful life of the asset or the modifications, whichever is less.
The estimated useful lives for AWA's ground property and equipment range from three to 12 years for owned property and equipment and up to 30 years
for the flight training facility. The estimated useful lives of AWA's owned aircraft, jet engines, flight equipment and rotable parts range from five to 25 years.
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