Southwest Airlines 2014 Annual Report Download - page 44

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The application of the acquisition method of accounting resulted in the Company recording a
significant amount of goodwill in connection with the acquisition of AirTran, which could result
in significant future impairment charges and negatively affect the Company’s financial results.
In accordance with applicable acquisition accounting rules, the Company recorded goodwill on
its Consolidated Balance Sheet to the extent the AirTran acquisition purchase price exceeded the net
fair value of AirTran’s tangible and intangible assets and liabilities as of the acquisition date. Goodwill
is not amortized, but is tested for impairment at least annually. Future impairment of Goodwill could
be recorded in the Company’s results of operations as a result of changes in assumptions, estimates, or
circumstances, some of which are beyond the Company’s control. Factors which could result in an
impairment, holding other assumptions constant, could include, but are not limited to: (i) reduced
passenger demand as a result of domestic or global economic conditions; (ii) significantly higher prices
for jet fuel; (iii) lower fares or passenger yields as a result of increased competition or lower demand;
(iv) a significant increase in future capital expenditure commitments; and (v) significant disruptions to
the Company’s operations as a result of both internal and external events such as terrorist activities,
actual or threatened war, labor actions by Employees, or further industry regulation. The Company can
provide no assurance that a significant impairment charge will not occur in one or more future periods.
Any such charges may materially negatively affect the Company’s financial results. See Note 1 to the
Consolidated Financial Statements for further information.
Item 1B. Unresolved Staff Comments
None.
36