Southwest Airlines 2014 Annual Report Download - page 132
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Included in Other available-for-sale securities are the Company’s investments associated with
its excess benefit plan which consist of mutual funds that are publicly traded and for which market
prices are readily available. This plan is a non-qualified deferred compensation plan designed to hold
Employee contributions in excess of limits established by Section 415 of the Internal Revenue Code of
1986, as amended. Payments under this plan are made based on the participant’s distribution election
and plan balance. Assets related to the funded portion of the deferred compensation plan are held in a
rabbi trust, and the Company remains liable to these participants for the unfunded portion of the plan.
The Company records changes in the fair value of the asset in the Company’s earnings.
All of the Company’s auction rate security instruments, totaling $27 million (net) at
December 31, 2014, are classified as available-for-sale securities and are reflected at their estimated
fair value in the Consolidated Balance Sheet. The Company’s Treasury Department determines the
estimated fair values of these securities utilizing a discounted cash flow analysis. The Company has
performed, and routinely updates, a valuation for each of its auction rate security
instruments, considering, among other items, the collateralization underlying the security investments,
the expected future cash flows, including the final maturity, associated with the securities, estimates of
the next time the security is expected to have a successful auction or return to full par value, forecasted
reset rates based on LIBOR or the issuer’s net loan rate, and a counterparty credit spread. To validate
the reasonableness of the Company’s discounted cash flow analyses, the Company compares its
valuations to third party valuations on a quarterly basis.
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