US Airways 2005 Annual Report Download - page 230

Table of Contents
US Airways, Inc.
Notes to the Financial Statements — (Continued)
retrospective" method, the requirements are the same as under the "modified prospective" method, but also permit entities to restate financial statements of
previous periods based on pro forma disclosures made in accordance with SFAS 123. US Airways adopted the requirements of SFAS 123R using the
modified prospective method.
America West Holdings and AWA employee stock options outstanding at the time of the merger were fully vested in accordance with the change of
control provisions of America West Holdings' stock option plans. US Airways outstanding stock options were cancelled as part of the plan of reorganization.
Accordingly, as of January 1, 2006, only unvested director stock options, employee stock options, and stock appreciation rights granted subsequent to the
merger are subject to the transition provisions of SFAS 123R.
As of January 1, 2006, approximately 2,865,925 unvested stock options and stock-based awards with weighted average fair values ranging from $7.94 to
$11.34 are subject to the recognition provisions of SFAS 123R. US Airways expects that the impact of adoption of SFAS 123R will be significant to the 2006
results of operations.
In May 2005, the FASB issued SFAS No 154, "Accounting Changes and Error Corrections — A replacement of APB Opinion No. 20 and FASB
Statement No. 3" ("SFAS 154"). SFAS 154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and
reporting of a change in accounting principle. SFAS 154 requires retrospective application to prior periods' financial statements of a voluntary change in
accounting principle unless it is impracticable. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by
including in net income of the period of the change the cumulative effect of changing to the new accounting principle. The provisions in SFAS 154 are
effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Accordingly, US Airways adopted
SFAS 154 effective January 1, 2006. The adoption of SFAS 154 is not expected to have a material effect on the results of operations of US Airways.
3. Emergence from bankruptcy
(a) Emergence and claims resolution
On September 16, 2005, the Bankruptcy Court entered an order approving and confirming the Joint Plan of Reorganization of US Airways, Inc. and Its
Affiliated Debtors and Debtors-in-Possession (the Plan of Reorganization). The Plan of Reorganization provides for a reorganization of each of the five
Debtors. In accordance with the Plan of Reorganization, US Airways Group entered into a merger transaction with America West Holdings.
Initially, the equity of the new US Airways Group was allocated to three categories of holders. First, existing shares of America West Holdings were
converted into shares of common stock of US Airways Group. Second, the new equity investors received shares for their initial investments and the exercise
of their options. Third, unsecured creditors of the Debtors have received or will receive distributions totaling 8.2 million shares of the new common stock of
US Airways Group in satisfaction of allowed unsecured claims, including shares issued to the Pension Benefit Guaranty Corporation ("PBGC") and the Air
Line Pilots Association ("ALPA").
The Plan of Reorganization classified claims into classes according to their relative seniority and other criteria and provides for the treatment for each
class of claims. Pursuant to the bankruptcy process, the Debtors' claims agent received approximately 4,800 timely-filed proofs of claims as of the general bar
date totaling approximately $26.4 billion in the aggregate, and approximately 380 proofs of claims timely-filed by governmental entities totaling
approximately $13.4 billion in the aggregate. As of December 31, 2005, there are $19.6 billion of unresolved claims. The ultimate resolution of certain of the
claims asserted 224