Alaska Airlines and Horizon Air 2010 Annual Report Download - page 162

approximately $97.7 million and increase
estimated 2011 pension expense by
approximately $9.1 million.
All of our defined-benefit pension plans are now
closed to new entrants.
Future changes in plan asset returns, assumed
discount rates and various other factors related
to the participants in our pension plans will
impact our future pension expense and
liabilities. We cannot predict what these factors
will be in the future.
LONG-LIVED ASSETS
As of December 31, 2010, we had approximately
$3.1 billion of property and equipment and
related assets, net of accumulated depreciation.
In accounting for these long-lived assets, we
make estimates about the expected useful lives
of the assets, changes in fleet plans, the
expected residual values of the assets, and the
potential for impairment based on the fair value
of the assets and the cash flows they generate.
Factors indicating potential impairment include,
but are not limited to, significant decreases in
the market value of the long-lived assets,
management decisions regarding the future use
of the assets, a significant change in the long-
lived assets condition, and operating cash flow
losses associated with the use of the long-lived
asset.
In 2008, Horizon announced plans to ultimately
exit its CRJ-700 fleet and transition to an
all-Q400 fleet. As a result of the decision, we
determined that the two owned CRJ-700s were
impaired and recorded an impairment charge on
the aircraft and their related spare parts of $5.5
million in 2008 to reduce the carrying value of
these assets to their estimated fair value.
There is inherent risk in estimating the fair value
of our aircraft and related parts and their salvage
values at the time of impairment. Actual
proceeds upon disposition of the aircraft or
related parts could be materially less than
expected, resulting in additional loss. Our
estimate of salvage value at the time of disposal
could also change, requiring us to increase the
depreciation expense on the affected aircraft.
PROSPECTIVE ACCOUNTING
PRONOUNCEMENTS
In September 2009, the Financial Accounting
Standards Board (“FASB”) issued ASU 2009-13,
Multiple Deliverable Revenue Arrangements—A
Consensus of the FASB Emerging Issues Task
Force. This update provides application guidance
on whether multiple deliverables exist, how the
deliverables should be separated and how the
consideration should be allocated to one or more
units of accounting. This guidance also
eliminates the residual method of allocation and
requires that arrangement consideration be
allocated at the inception of the arrangement to
all deliverables using the relative selling price
method. This accounting standard is effective for
revenue arrangements entered into or materially
modified in fiscal years beginning on or after
June 15, 2010. This guidance is effective for us
on January 1, 2011 and will change our
accounting for recognition of revenue associated
with frequent flyer credits. Management does not
believe that there will be an immediate
significant impact of this new standard on the
Company’s financial position, results of
operations, cash flows, or disclosures.
Recently, the Financial Accounting Standards
Board (FASB) has issued a number of proposed
Accounting Standards Updates (ASUs). Those
proposed ASUs are as follows:
• Proposed ASU—Revenue Recognition—was
issued in June 2010 and continues to
evolve. We believe that a new revenue
recognition standard could significantly
impact the Company’s accounting for the
Company’s Mileage Plan miles earned by
passengers who fly on us or our partners, or
miles sold to third parties.
• Proposed ASU—Leases—was issued in
August 2010. This proposed standard
overhauls accounting for leases and will
apply a “right-of-use” model in accounting for
nearly all leases. For lessees, this will result
in recognizing an asset representing the
lessee’s right to use the leased asset for the
lease term and a liability to make lease
payments. This proposed standard eliminates
the operating lease concept from an
accounting perspective, thereby eliminating
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