US Airways 2007 Annual Report Download - page 147

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
bankruptcy, significant prepetition liabilities were discharged. The surviving liabilities and the assets acquired in the merger are shown at
estimated fair value. Liabilities assumed reflects the discharge of $1.24 billion of liabilities for postretirement benefits, $868 million of
liabilities related to the termination of US Airways' defined benefit pension plans and $75 million of liabilities related to trade accounts
payable and other liabilities. Most of these obligations were only entitled to receive such distributions of cash and common stock as
provided for under the Plan of Reorganization. The surviving liabilities and the assets acquired in the merger are shown at estimated fair
value. US Airways used an outside appraisal firm to assist in determining the fair value of long-lived tangible and identifiable intangible
assets. Significant assets and liabilities adjusted to fair market value include expendable spare parts and supplies, property and equipment,
airport take-off and landing slots, aircraft leases, deferred revenue and continuing debt obligations. The foregoing estimates and
assumptions are inherently subject to significant uncertainties and contingencies beyond the control of US Airways. Accordingly, there
can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary
materially.
The excess of the reorganization value over tangible assets and identifiable intangible assets and liabilities has been reflected as
goodwill on the balance sheet of December 31, 2005. The net assets acquired and liabilities assumed in connection with the merger and
initial allocation of purchase price to US Airways are as follows (in millions):
Current assets $ 922
Property and equipment 2,271
Other intangible assets 548
Other assets 778
Goodwill 732
Liabilities assumed (5,250)
$ 1
As a result of the adoption of fresh-start reporting, US Airways' post-emergence financial statements are not comparable with its
pre-emergence financial statements, because they are, in effect, those of a new entity. US Airways also recorded certain purchase
accounting adjustments specifically related to the merger with America West Holdings. The purchase accounting adjustments include
those made to conform the accounting policies of US Airways to those of America West Holdings, including an adjustment to reduce the
air traffic liability by $124 million to conform its accounting policies for recognizing revenue from forfeited tickets, and an increase to
noncurrent employee benefit liabilities and other of $16 million to conform to America West Holdings' policy of not discounting its
workers compensation liability. Adjustments to conform accounting policies were recorded as direct adjustments to goodwill. In
connection with the merger, primarily due to the relocation of the corporate headquarters from Arlington, Virginia to Tempe, Arizona,
US Airways accrued in purchase accounting $24 million of severance and benefits related to planned reductions in force for its non-union
employees. US Airways Group incurred additional severance and benefits for reductions in force related to the merger; however, due to
requirements for continued service during the integration period, these severance and benefits were not recorded as an adjustment to the
purchase price allocation but were expensed. See Note 3 for discussion of amounts expensed for severance and benefits in the fourth
quarter of 2005 and during 2006.
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