US Airways 2006 Annual Report Download - page 76

Table of Contents
have not yet adopted the measurement provisions of this statement with respect to our postretirement benefit plans, which are measured
on September 30, and are in the process of determining the impact of the adoption on our consolidated financial statements. Our defined
benefit pension plans are measured as of the balance sheet date.
In September 2006, the FASB issued FASB Staff Position ("FSP") No. AUG AIR-1 "Accounting for Planned Major Maintenance
Activities". This amends the existing major maintenance accounting guidance contained within the AICPA Industry Audit Guide "Audits
of Airlines" and prohibits the use of the accrue in advance method of accounting for planned major maintenance activities for owned
aircraft. The provisions of the announcement are applicable for fiscal years beginning after December 15, 2006. US Airways Group
currently uses the direct expense method of accounting for planned major maintenance, an acceptable method under generally accepted
accounting principles in the United States of America. Therefore, the adoption of FSP No. AUG AIR-1 is not expected to have any
material impact on US Airways Group's consolidated financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 ("SAB 108"). Due to diversity in practice among registrants,
SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of
determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006.
We adopted SAB 108 in the fourth quarter of 2006 and its adoption had no effect on our consolidated financial statements for the year
ended December 31, 2006 or for any prior period presented.
In June 2006, the FASB issued Interpretation No. 48, "Accounting of Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109" ("FIN 48"), which clarifies the accounting for uncertainty in income taxes recognized in financial statements. FIN 48
requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained
by the taxing authority. US Airways Group will be required to adopt FIN 48 in the first quarter of fiscal year 2007. Management has
evaluated the requirements of FIN 48 and does not expect it to have a material impact on US Airways Group's consolidated financial
statements.
On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123R-3, "Transition Election Related to Accounting for
Tax Effects of Share-Based Payment Awards." We elected to adopt the modified prospective method, which is the simplified method
provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS 123R. The modified
prospective method was used to determine the beginning balance of the additional paid-in capital pool ("APIC pool") related to the tax
effects of employee stock-based compensation. Due to our history of tax net operating losses, we had no beginning balance in the APIC
pool at the date of adoption of SFAS 123R on January 1, 2006.
We use the "with-and-without" or "incremental" approach for determining the order in which tax benefits derived from the share-
based payment awards are utilized. Using the with-and-without approach, actual income taxes payable for the period are compared to the
amount of income taxes that would have been payable if there had been no share-based compensation expense for tax purposes in excess
of the compensation expense recognized for financial reporting purposes. As a result of this approach, tax net operating loss
carryforwards not related to share-based compensation are utilized before the current period's share-based compensation deduction. As a
result of this accounting treatment, we have a fully reserved deferred tax asset of approximately $25 million related to tax net operating
loss carryforwards related to deductions for excess tax benefits. The benefit of the valuation allowance release related to these deductions
will be recorded directly to equity as additional paid-in-capital when such benefits are realized.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Sensitive Instruments
Our primary market risk exposures include commodity price risk (i.e., the price paid to obtain aviation fuel), interest rate risk and
equity price risk. The potential impact of adverse increases in these risks and general strategies that we employ to manage these risks are
discussed below. The risks identified below are consistent from year to year. The following sensitivity analyses do not consider the
effects that an adverse change may have on the overall
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