US Airways 2007 Annual Report Download - page 138

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
(e) Restricted Cash
Restricted cash includes deposits in trust accounts primarily to fund certain taxes and fees and collateralize letters of credit and
workers' compensation claims, deposits securing certain letters of credit and surety bonds and deposits held by institutions that process
credit card sales transactions. Restricted cash is stated at cost, which approximates fair value.
(f) 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. These items are generally
charged to expense when issued for use.
(g) Property and Equipment
Property and equipment are recorded 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, 2007, 2006, the three months ended December 31, 2005 and nine months ended September 30, 2005 was $4 million,
$2 million, $1 million and $1 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.
Effective with the emergence from bankruptcy and the merger with America West Holdings, US Airways conformed its estimated
useful lives to those of America West Holdings. 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 30 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. For periods
prior to September 30, 2005, the estimated useful lives for owned property and equipment ranged from five to ten years, the estimated
useful lives for training equipment and buildings ranged from ten to 30 years and the estimated useful lives of owned aircraft, jet engines,
flight equipment and rotable parts ranged from five to 30 years.
US Airways 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. US Airways recorded no impairment charges in
the years ended December 31, 2007, 2006 and 2005.
(h) 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.
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