US Airways 2009 Annual Report Download - page 121

Table of Contents
(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. During 2008, US Airways recorded a $5 million write down related to its Boeing 737 spare parts inventory
to reflect lower of cost or fair value.
(g) Property and Equipment
Property and equipment are recorded at cost. Interest expense related to the acquisition of certain property and equipment, including
aircraft purchase deposits, is 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, 2009, 2008 and 2007 was $10 million, $6 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 of owned aircraft, jet engines, other 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 estimated useful lives for other owned property and equipment range
from three to 12 years and range from 18 to 30 years for training equipment and buildings.
US Airways records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets
might be impaired. 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.
US Airways recorded a $13 million impairment charge in 2008 related to the decline in the fair value of Boeing 737 rotable parts
included in flight equipment on its consolidated balance sheet. US Airways recorded no impairment charges in the years ended
December 31, 2009 and 2007.
(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
Goodwill
In 2008, US Airways recorded a $622 million impairment charge to write off all the goodwill created by the merger of US Airways
Group and America West Holdings in September 2005. US Airways performed an interim goodwill impairment test during 2008 as a
result of a significant increase in fuel prices, declines in US Airways Group's stock price and mainline capacity reductions, which led to
no implied fair value of goodwill.
Other intangible assets
Other intangible assets consist primarily of trademarks, international route authorities, airport take-off and landing slots and airport
gates. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual
values and reviewed for impairment whenever events or changes in
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