Southwest Airlines 2013 Annual Report Download - page 110

Balance Sheet are those in which the Company pays or receives cash for transactions with the same counterparty
that settle on the same day and in the same currency via one net payment or receipt. For cash collateral held by
the Company or provided to counterparties, the Company nets such amounts against the fair value of the
Company’s derivative portfolio by each counterparty. The Company has elected to utilize netting for both its fuel
derivative instruments and interest rate swap agreements and also classifies such amounts as either current or
noncurrent, based on the net fair value position with each of the Company’s counterparties in the Consolidated
Balance Sheet.
The Company’s application of its netting policy associated with cash collateral differs depending on
whether its derivative instruments are in a net asset position or a net liability position. If its fuel derivative
instruments are in a net asset position with a counterparty, cash collateral amounts held are first netted against
current outstanding derivative amounts associated with that counterparty until that balance is zero, and then any
remainder is applied against the fair value of noncurrent outstanding derivative instruments. If the Company’s
fuel derivative instruments are in a net liability position with the counterparty, cash collateral amounts provided
are first netted against noncurrent outstanding derivative amounts associated with that counterparty until that
balance is zero, and then any remainder is applied against the fair value of current outstanding derivative
instruments. At December 31, 2013, and December 31, 2012, no cash collateral deposits, letters of credit, and/or
aircraft collateral were provided by or held by the Company associated with its outstanding fuel derivative
instruments.
As of December 31, 2013, $31 million had been provided to one counterparty associated with interest rate
derivatives based on the Company’s outstanding net liability derivative position with that counterparty. In
addition, in connection with interest rate swaps entered into by AirTran, $1 million had been provided to one
counterparty at December 31, 2013, as a result of the outstanding net liability derivative position with that
counterparty. The outstanding interest rate net derivative positions with all other counterparties at December 31,
2013, were assets to the Company.
The Company has the following recognized financial assets and financial liabilities resulting from those
transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance
for balance sheet offsetting:
Offsetting of derivative assets
(i) (ii) (iii) = (i) + (ii) (i) (ii) (iii) = (i) + (ii)
(in millions) December 31, 2013 December 31, 2012
Description
Balance Sheet
location
Gross
amounts of
recognized
assets
Gross
amounts
offset in
the
Balance
Sheet
Net amounts
of assets
presented in
the Balance
Sheet
Gross
amounts of
recognized
assets
Gross
amounts
offset in
the
Balance
Sheet
Net amounts
of assets
presented in
the Balance
Sheet
Fuel derivative contracts . . . Prepaid expenses and other
current assets
$249 $(182) $ 67(a) $375 $(327) $ 48(a)
Fuel derivative contracts . . . Other assets $225 $(100) $125 $588 $(367) $221
Fuel derivative contracts . . . Accrued liabilities $ 9 $ (9) $— $ 10 $ (10) $—
Fuel derivative contracts . . . Other noncurrent liabilities $— $ — $— $— $ — $—
Interest rate derivative
contracts .............. Other assets $ 20 $ — $ 20 $ 31 $ — $ 31
(a) Amounts included in Prepaid expenses and other current assets.
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