US Airways 2008 Annual Report Download - page 73

Table of Contents
and demand factors at the related airport locations as well as available market sale and lease data. For trademarks, we utilized a form of
the income approach known as the relief-from-royalty method. As a result of these assessments, no impairment was indicated. In
addition, we performed the annual impairment test on our international route authorities and trademarks during the fourth quarter of 2008,
at which time we concluded that no impairment exists. We will perform our next annual impairment test on October 1, 2009.
In connection with completing step two of our goodwill impairment analysis in the second quarter of 2008, we also assessed the
current fair values of our other significant assets including owned aircraft, aircraft leases, and aircraft spare parts. We concluded that the
only additional impairment indicated was associated with the decline in fair value of certain spare parts associated with our Boeing 737
fleet. Due to record high fuel prices and the industry environment in 2008, demand for the Boeing 737 aircraft type declined given its
lower fuel efficiency as compared to other aircraft types. The fair value of these spare parts was determined using a market approach on
the premise of continued use of the aircraft through our final scheduled lease return.
In accordance with SFAS No. 144, we determined that the carrying amount of the Boeing 737 spare parts classified as long-lived
assets was not recoverable as the carrying amount of the Boeing 737 assets was greater than the sum of the undiscounted cash flows
expected from the use and disposition of these assets. As a result of this impairment analysis, we recorded a $13 million impairment
charge in the second quarter of 2008 related to Boeing 737 rotable parts included in flight equipment on our consolidated balance sheet.
We also recorded a $5 million write down in the second quarter of 2008 related to our Boeing 737 spare parts inventory included in
materials and supplies, net on our consolidated balance sheet to reflect lower of cost or market.
Investments in Marketable Securities
We account for investments in marketable securities in accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Management determines the appropriate classification of securities at the time of purchase
and re-evaluates such designation as of each balance sheet date. As of December 31, 2008, all current investments in marketable
securities were classified as held to maturity and all noncurrent investments in marketable securities, consisting entirely of auction rate
securities, are classified as available for sale.
We determine the fair value of our available for sale securities using the criteria of SFAS No. 157, "Fair Value Measurements,"
which we adopted on January 1, 2008. SFAS No. 157, among other things, defines fair value, establishes a consistent framework for
measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or
nonrecurring basis. SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement
that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
We estimate the fair value of our auction rate securities based on the following: (i) the underlying structure of each security; (ii) the
present value of future principal and interest payments discounted at rates considered to reflect current market conditions;
(iii) consideration of the probabilities of default, passing a future auction, or repurchase at par for each period; and (iv) estimates of the
recovery rates in the event of default for each security. These estimated fair values could change significantly based on future market
conditions.
We review declines in the fair value of our investments in marketable securities in accordance with Financial Accounting Standards
Board ("FASB") Staff Position ("FSP") SFAS 115-1 and 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments," to determine the classification of the
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