US Airways 2007 Annual Report Download - page 78

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
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 and 2005 was $4 million, $2 million and $4 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.
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.
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, 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.
(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. 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
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