Alaska Airlines and Horizon Air 2009 Annual Report Download - page 166

Income Taxes
The Company uses the asset and liability
approach for accounting and reporting income
taxes. Deferred tax assets and liabilities are
recognized for future tax consequences
attributable to differences between the financial
statement carrying amounts of existing assets
and liabilities and their respective tax bases, and
for operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to
taxable income in the years in which those
temporary differences are expected to be
recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is
recognized in the period that includes the
enactment date. A valuation allowance would be
established, if necessary, for the amount of any
tax benefits that, based on available evidence,
are not expected to be realized. The Company
accounts for unrecognized tax benefits in
accordance with the accounting standards. See
Note 11 for further discussion.
Taxes Collected from Passengers
Taxes collected from passengers, including sales
taxes, airport and security fees and other fees,
are recorded on a net basis within passenger
revenue in the consolidated statements of
operations.
Stock-Based Compensation
Accounting standards require companies to
recognize as expense the fair value of stock
options and other equity-based compensation
issued to employees as of the grant date. These
standards apply to all stock awards that the
Company grants to employees as well as the
Company’s Employee Stock Purchase Plan
(ESPP), which features a look-back provision and
allows employees to purchase stock at a 15%
discount. All stock-based compensation expense
is recorded in wages and benefits in the
consolidated statements of operations.
Accounting Pronouncements Adopted in
2009
Effective July 2, 2009, the Accounting Standards
Codification (ASC) of the Financial Accounting
Standards Board (FASB) became the single
official source of authoritative, nongovernmental
GAAP in the United States. Although the
Company’s accounting policies were not affected
by the conversion to ASC, references to specific
accounting standards in these notes to the
consolidated financial statements have been
changed to eliminate references to previous
standards.
In March 2008, the FASB issued new standards
regarding disclosures about derivatives
instruments and hedging. These new standards
require entities that use derivative instruments
to provide certain qualitative disclosures about
their objectives and strategies for using such
instruments, amounts and location of the
derivatives in the financial statements, among
other disclosures. This standard was adopted as
of January 1, 2009. The required disclosures are
included in Note 3 and Note 12. The adoption of
this standard did not have a material impact on
the disclosures historically provided.
In April 2009, the FASB issued a new standard
that clarifies the determination of fair value for
assets and liabilities that may be involved in
transactions that would not be considered
orderly as defined in the position statement. In
April 2009, the FASB also issued new accounting
standards that provide additional guidance in
determining whether a debt security is other-
than-temporarily impaired and how entities
should record the impairment in the financial
statements. The standard requires credit losses,
as defined, to be recorded through the
statement of operations and the remaining
impairment loss to be recorded through
accumulated other comprehensive income. Both
of these standards were effective for the
Company as of June 30, 2009. See Note 5 and
Note 12 for a discussion of the impact of these
new positions to the Company’s financial
statements.
In April 2009, the FASB issued new accounting
standards that require companies to provide, on
an interim basis, disclosures that were
previously only required in annual statements for
the fair value of financial instruments. This new
standard was effective for the Company as of
June 30, 2009. The required disclosures
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