US Airways 2007 Annual Report Download - page 139

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
(i) Goodwill and Other Intangibles, Net
At December 31, 2007, 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. US Airways 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. US
Airways tested its goodwill for impairment during the fourth quarter of 2007, at which time it concluded that fair value of the reporting
units was in excess of the carrying value. US Airways 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. As of each of December 31, 2007 and 2006, US Airways had $55 million of international route authorities on its balance
sheets. The carrying value of the trademarks was $30 million as of December 31, 2007 and 2006. 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 quarter of 2007, at which time US Airways concluded that no
impairment exists. US Airways will perform its next annual impairment test on October 1, 2008.
SFAS 142 requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairments in accordance with SFAS 144. The following table provides information relating
to US Airways' intangible assets subject to amortization as of December 31, 2007 and 2006 (in millions):
2007 2006
Airport take-off and landing slots $ 435 $ 411
Airport gate leasehold rights 52 52
Accumulated amortization (58) (35)
Total $ 429 $ 428
The intangible assets subject to amortization generally are amortized over 25 years for airport take-off and landing slots and over
the term of the lease for airport gate leasehold rights on a straight-line basis and are included in depreciation and amortization on the
statements of operations. For the years ended December 31, 2007 and 2006, the three months ended December 31, 2005, and the nine
months ended September 30, 2005, US Airways recorded amortization expense of $23 million, $27 million, $8 million, and $19 million,
respectively, related to its intangible assets. US Airways expects to record annual amortization expense of $24 million in 2008,
$24 million in year 2009, $23 million in year 2010, $21 million in year 2011, and $19 million in year 2012 related to these intangible
assets.
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