Alaska Airlines and Horizon Air 2014 Annual Report Download - page 153

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alaska Air Group, Inc.
December 31, 2014
NOTE 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The consolidated financial statements include the accounts of Alaska Air Group, Inc. (Air Group or the
Company) and its subsidiaries, Alaska Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon),
through which the Company conducts substantially all of its operations. All significant intercompany
balances and transactions have been eliminated. These financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of America and their
preparation requires the use of management’s estimates. Actual results may differ from these
estimates.
Certain reclassifications, such as changes in our equity structure, have been made to prior year
financial statements to conform to classifications used in the current year.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less,
such as money market funds, commercial paper and certificates of deposit. They are carried at cost,
which approximates market value. The Company reduces cash balances when funds are disbursed. Due
to the time delay in funds clearing the banks, the Company normally maintains a negative balance in its
cash disbursement accounts, which is reported as a current liability. The amount of the negative cash
balance was $7 million and $11 million at December 31, 2014 and 2013, respectively, and is included
in accounts payable, with the change in the balance during the year included in other financing activities
in the consolidated statements of cash flows.
The Company has restricted cash balances primarily used to guarantee various letters of credit, self-
insurance programs, or other contractual rights. Restricted cash consists of highly liquid securities with
original maturities of three months or less. They are carried at cost, which approximates fair value.
Marketable Securities
Investments with original maturities of greater than three months and remaining maturities of less than
one year are classified as short-term investments. Investments with maturities beyond one year may be
classified as short-term based on their highly liquid nature and because such marketable securities
represent the investment of cash that is available for current operations. All cash equivalents and short-
term investments are classified as available-for-sale and realized gains and losses are recorded using
the specific identification method. Changes in market value, excluding other-than-temporary
impairments, are reflected in accumulated other comprehensive loss (AOCL).
Investments are considered to be impaired when a decline in fair value is judged to be other-than-
temporary. The Company uses a systematic methodology that considers available quantitative and
qualitative evidence in evaluating potential impairment. If the cost of an investment exceeds its fair
value, management evaluates, among other factors, general market conditions, credit quality of debt
instrument issuers, the duration and extent to which the fair value is less than cost, our intent and
ability to hold, or plans to sell, the investment. Once a decline in fair value is determined to be other-
than-temporary, an impairment charge is recorded to Other-net in the consolidated statements of
operations and a new cost basis in the investment is established.
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ŠForm 10-K