Southwest Airlines 2012 Annual Report Download - page 116

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The Company had no transfers of assets or liabilities between any of the above levels during the years
ended December 31, 2012 or 2011. The Company did not have any assets or liabilities measured at fair value on
a nonrecurring basis as of December 31, 2012 or 2011. The following tables present the Company’s activity for
items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for 2012 and
2011:
Fair value measurements using significant
unobservable inputs (Level 3)
(in millions)
Fuel
derivatives
Auction rate
securities
Other
securities Total
Balance at December 31, 2011 .................... $ 417 $ 67 $ 5 $ 489
Total gains or (losses) (realized or unrealized)
Included in earnings ........................... (62) — — (62)
Included in other comprehensive income .......... 22 — — 22
Purchases ..................................... 1,003(b) — — 1,003
Sales ......................................... (1,081)(b) (31) — (1,112)
Settlements .................................... (80) — — (80)
Balance at December 31, 2012 .................... $ 219 $ 36(a) $ 5 $ 260
The amount of total gains or (losses) for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets still held
at December 31, 2012 ......................... $ 27 $ — $ — $ 27
(a) Included in Other assets in the Consolidated Balance Sheet.
(b) The purchase and sale of fuel derivatives are recorded gross based on the structure of the derivative
instrument, and whether a contract with multiple derivatives is purchased as a single instrument or separate
instruments.
Fair value measurements using significant
unobservable inputs (Level 3)
(in millions)
Fuel
derivatives
Auction rate
securities
Other
securities Total
Balance at December 31, 2010 .................... $ 686 $ 93 $ 5 $ 784
Total gains or (losses) (realized or unrealized)
Included in earnings .......................... (26) — — (26)
Included in other comprehensive income .......... 30 3 — 33
Purchases ..................................... 449(b) — — 449
Sales ......................................... (546)(b) (29) — (575)
Settlements ................................... (176) — — (176)
Balance at December 31, 2011 .................... $ 417 $ 67(a) $ 5 $ 489
The amount of total gains or (losses) for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets still held
at December 31, 2011 ......................... $ 80 $ — $ — $ 80
(a) Included in Other assets in the Consolidated Balance Sheet.
(b) The purchase and sale of fuel derivatives are recorded gross based on the structure of the derivative
instrument, and whether a contract with multiple derivatives is purchased as a single instrument or separate
instruments.
The significant unobservable input used in the fair value measurement of the Company’s derivative option
contracts is implied volatility. Holding other inputs constant, a significant increase (decrease) in implied
volatility would result in a significantly higher (lower) fair value measurement for the Company’s derivative
108