US Airways 2006 Annual Report Download - page 88

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
The estimated useful lives range from three to 12 years for owned property and equipment and from 18 to 30 years for training
equipment and buildings. The estimated useful lives of owned aircraft, jet engines, flight equipment and rotable parts range from five to
25 years. Leasehold improvements relating to flight equipment and other property on operating leases are amortized over the life of the
lease or the life of the asset, whichever is shorter, on a straight-line basis.
The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the
assets might be impaired as defined by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less cost to sell. The Company recorded no impairment charges
in the years ended December 31, 2006, 2005 and 2004.
(g) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. A valuation allowance is established, if necessary, for the amount of
any tax benefits that, based on available evidence, are not expected to be realized.
(h) Goodwill and Other Intangibles, Net
At December 31, 2006, goodwill represents the purchase price in excess of the net amount assigned to assets acquired and liabilities
assumed by America West Holdings on September 27, 2005. Since that time, there have been no events or changes that would indicate an
impairment to goodwill. The Company performs its annual impairment test on October 1, unless events or changes indicate a potential
impairment in the carrying value. The provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") require that a
two-step impairment test be performed on goodwill. In the first step, the fair value of the reporting unit is compared to its carrying value.
If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit, goodwill is not impaired and no
further testing is required. If the carrying value of the net assets of the reporting unit exceeds the fair value of the reporting unit, then a
second step must be performed in order to determine the implied fair value of the goodwill and compare it to the carrying value of the
goodwill. If the carrying value of goodwill exceeds its implied fair value, then an impairment loss is recorded equal to the difference. The
Company tested its goodwill for impairment during the fourth quarter of 2006, at which time it concluded that fair value of the reporting
units was in excess of the carrying value. The Company assessed the fair value of the reporting units considering both the income
approach and market approach. Under the market approach, the fair value of the reporting units is based on quoted market prices for
US Airways Group common stock and the number of shares outstanding of US Airways Group common stock. Under the income
approach, the fair value of the reporting unit is based on the present value of estimated future cash flows.
Other intangible assets consist primarily of trademarks, international route authorities and airport take-off and landing slots and
airport gates acquired in connection with the merger. As of December 31, 2006 and 2005, the Company had $55 million and $56 million
of international route authorities on its balance sheets, respectively. The carrying value of the trademarks was $30 million as of
December 31, 2006 and 2005. International route authorities and trademarks are classified as indefinite lived assets under SFAS 142.
Indefinite lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances
indicate that the asset may be impaired. International route authorities and trademarks were tested for impairment during the fourth
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