Southwest Airlines 2015 Annual Report Download - page 92

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Goodwill and Intangible Assets
The Company applies a fair value based impairment test to the carrying value of goodwill and
indefinite-lived intangible assets annually on October 1st, or more frequently if certain events or
circumstances indicate that an impairment loss may have been incurred. The Company assesses the
value of goodwill and indefinite-lived assets under either a qualitative or quantitative approach. Under
a qualitative approach, the Company considers various market factors, including applicable key
assumptions listed below. These factors are analyzed to determine if events and circumstances could
reasonably have affected the fair value of goodwill and indefinite-lived intangible assets. If the
Company determines that it is more likely than not that an indefinite-lived intangible asset is impaired,
the quantitative approach is used to assess the asset’s implied fair value and the amount of the
impairment. Under a quantitative approach, the implied fair value of the Company’s identifiable assets
and liabilities is calculated based on key assumptions. If the Company assets’ carrying value exceeds
the fair value calculated using the quantitative approach, an impairment charge is recorded for the
difference in fair value and carrying value.
The following table is a summary of the Company’s intangible assets, which are included as a
component of Other assets in the Company’s Consolidated Balance Sheet, as of December 31, 2015
and 2014:
Year ended December 31, 2015 Year ended December 31, 2014
(in millions)
Weighted-
average useful
life (in years)
Gross carrying
amount
Accumulated
amortization
Gross carrying
amount
Accumulated
Amortization
Customer relationships/
marketing agreements 9 $ 38 $ 30 $ 38 $ 26
Trademarks/trade names 6 36 34 36 30
Owned domestic slots Indefinite 303 n/a 303 n/a
Leased domestic slots (b) 47 17 3 19 5
Gate leasehold rights (a) 15 180 43 60 32
Total 15 $ 574 $ 110 $ 456 $ 93
(a) Intangible assets primarily consist of acquired leasehold rights to certain airport owned gates at
Chicago’s Midway International Airport, takeoff and landing slots (a “slot” is the right of an air carrier,
pursuant to regulations of the Federal Aviation Administration (“FAA”), to operate a takeoff or landing
at a specific time at certain airports) at certain domestic slot-controlled airports, and certain intangible
assets recognized from the AirTran acquisition. The increase in Intangible assets during 2015 was
primarily due to the acquisition of two additional airport gate rights at Dallas Love Field, which were
subleased from United Airlines. The purchase price paid for these airport gate rights was included as a
component of Capital expenditures in the accompanying Consolidated Statement of Cash Flows.
(b) Useful life of leased slots is based on the stated lease term.
The aggregate amortization expense for 2015, 2014, and 2013 was $19 million, $13 million, and $19
million, respectively. Estimated aggregate amortization expense for the five succeeding years and
thereafter is as follows: 2016 – $17 million, 2017 – $14 million, 2018 – $13 million, 2019 – $13
million, 2020 – $12 million, and thereafter – $89 million.
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