For long-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell.  

 

To determine whether impairments exist for aircraft used in operations, we group assets at the fleet-type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors. If an impairment occurs, the impairment loss recognized is the amount by which the aircraft's carrying amount exceeds its estimated fair value. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.  

 

Income Tax Valuation Allowance  

 

We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets. We establish valuation allowances if it is not likely we will realize our deferred income tax assets. In making this determination, we consider all available positive and negative evidence and make certain assumptions. We consider, among other things, our future projections of sustained profitability, deferred income tax liabilities, the overall business environment, our historical financial results, our industry's historically cyclical financial results and potential current and future tax planning strategies. We recorded a full valuation allowance in 2004 due to our cumulative loss position at that time, compounded by the negative industry-wide business trends and outlook. At December 31, 2012, we had an $11.0 billion valuation allowance established against our deferred income tax assets, which represented a full valuation allowance against our net deferred income tax assets.  

 

For 2012, we recorded a pre-tax profit of $1.0 billion, and during 2012 we moved from a three-year cumulative loss position to a cumulative income position for the first time since we established the full valuation allowance. However given the industry's recent history of significant losses, we concluded as of December 31, 2012 that another year of significant profitability was needed to support a release of valuation allowance.  

 

During 2013, we continued our trend of sustained profitability, recording a pre-tax profit of $2.5 billion for the year. During the December 2013 quarter, after considering all relevant factors, we concluded that our deferred income tax assets are more likely than not to be realized. In evaluating the likelihood of utilizing our net deferred net assets, the significant relevant factors that we considered are: (1) our recent history of profitability; (2) growth in the U.S. and global economies; (3) forecast of airline revenue trends; (4) estimate of future fuel prices; and (5) future impact of taxable temporary differences. Accordingly, at December 31, 2013, we released almost all of our valuation allowance against our net deferred income tax assets, primarily resulting in the $8.0 billion benefit in our provision for income taxes.  

 

Defined Benefit Pension Plans  

 

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