JetBlue Airlines 2009 Annual Report Download - page 62

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In June 2009, the Emerging Issues Task Force of the FASB, or EITF, reached final consensus on
Accounting Standards update No. 2009-15, Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance, or ASU 2009-15, which changes the accounting for equity share
lending arrangements on an entity’s own shares when executed in contemplation of a convertible debt offering.
ASU 2009-15 requires the share lending arrangement to be measured at fair value and recognized as an
issuance cost. These issuance costs should then be amortized as interest expense over the life of the financing
arrangement. Shares loaned under these arrangements should be excluded from computation of earnings per
share. ASU 2009-15 is effective for fiscal years beginning after December 15, 2009 and requires retrospective
application for all arrangements outstanding as of the beginning of the fiscal year. As described more fully in
Note 2, we lent 44.9 million shares of our common stock in conjunction with our 2008 $201 million
convertible debt issuance that is subject to the provisions of ASU 2009-15. While ASU 2009-15 requires that
we measure this share lending arrangement at fair value, it does not provide guidance on how fair value
should be determined. There is no observable market for shares lent, nor do we have any history of lending
our shares. Further complicating the determination of fair value is the relative number of shares lent to the
total shares we otherwise had outstanding. There have been relatively few share lending arrangements by an
issuer in the market place generally. We are not aware of an instance where shares have been loaned in a
manner that did not support an issuer’s transaction. The result is that determination of a stand-alone fair value
for the share lending arrangement, separate from the other components of the financing transaction is difficult
to determine. The range of fair values could be as little as the one cent per share fee that we charged to
initially lend these shares, or as great as $100 million, reflective of our estimate of the effective borrowing rate
for this offering if it didn’t include a share lending arrangement. We are continuing to evaluate the impact that
the adoption of this standard will have on our financial statements and related disclosures.
In September 2009, the EITF reached final consensus on Issue 08-1, Revenue Arrangements with Multiple
Deliverables, or Issue 08-1, which will update ASC 605, Revenue Recognition, and changes the accounting for
certain revenue arrangements. The new requirements change the allocation methods used in determining how
to account for multiple payment streams and will result in the ability to separately account for more
deliverables, and potentially less revenue deferrals. Additionally, Issue 08-1 requires enhanced disclosures in
financial statements. Issue 08-1 is effective for revenue arrangements enter into or materially modified in fiscal
years beginning after June 15, 2010 on a prospective basis, with early application permitted. We are currently
evaluating the impact this Issue will have on our financial statements.
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