US Airways 2008 Annual Report Download - page 75

Table of Contents
Deferred Tax Asset Valuation Allowance
At December 31, 2008, US Airways Group has a full valuation allowance against its net deferred tax assets. In assessing the
realizability of the deferred tax assets, we considered whether it was more likely than not that some portion or all of the deferred tax
assets will be realized, in accordance with SFAS No. 109, "Accounting for Income Taxes." We generated NOL in 2008, which was
reserved by this full valuation allowance.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This standard defines fair value, establishes a
framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosure
about fair value measurements. This pronouncement applies to other accounting standards that require or permit fair value measurements.
Accordingly, this statement does not require any new fair value measurement. This statement is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In December 2007, the FASB agreed to a one year deferral of
SFAS No. 157's fair value measurement requirements for nonfinancial assets and liabilities that are not required or permitted to be
measured at fair value on a recurring basis. As such, we did not apply the fair value measurement requirements of SFAS No. 157 for
nonfinancial assets and liabilities when performing our goodwill and other assets impairment test as discussed above in "Critical
Accounting Policies." We adopted SFAS No. 157 on January 1, 2008, which had no effect on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations." SFAS No. 141R is effective for
fiscal years beginning after December 15, 2008 and adjusts certain guidance related to recording nearly all transactions where one
company gains control of another. The statement revises the measurement principle to require fair value measurements on the acquisition
date for recording acquired assets and liabilities. It also changes the requirements for recording acquisition-related costs and liabilities.
Additionally, the statement revises the treatment of valuation allowance adjustments related to income tax benefits in existence prior to a
business combination. The current standard, SFAS No. 141, requires that adjustments to these valuation allowances be recorded as
adjustments to goodwill or intangible assets if no goodwill exists, while the new standard will require companies to adjust current income
tax expense. Effective January 1, 2009, we adopted the provisions of SFAS No. 141R and all future decreases in the valuation allowance
established in purchase accounting as a result of the merger will be recognized as a reduction to income tax expense.
On January 1, 2008, we adopted the measurement date provisions of SFAS No. 158, "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)." The measurement date
provisions require plan assets and obligations to be measured as of the employer's balance sheet date. We previously measured our other
postretirement benefit obligations as of September 30 each year. As a result of the adoption of the measurement date provisions, we
recorded a $2 million increase to our postretirement benefit liability and a $2 million increase to accumulated deficit, representing the net
periodic benefit cost for the period between the measurement date utilized in 2007 and the beginning of 2008. The adoption of the
measurement provisions of SFAS No. 158 had no effect on our consolidated statements of operations.
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." FSP APB 14-1 applies to convertible debt
instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement of the
conversion option. FSP APB 14-1 requires bifurcation of the instrument into a debt component that is initially recorded at fair value and
an equity component. The difference between the fair value of the debt component and the initial proceeds from issuance of the
instrument is recorded as a component of equity. The liability component of the debt instrument is accreted to par using the effective
yield method; accretion is reported as a component of interest expense. The equity component is not subsequently re-valued as long as it
continues to qualify for equity treatment. FSP APB 14-1 must be applied retrospectively to previously issued cash-settleable convertible
instruments as well as prospectively to newly issued instruments. FSP APB 14-1 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The adoption of FSP APB 14-1 will result in increased non-cash
interest expense in future periods related to
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