Delta Air Lines Inc. (DAL)

Delta's goodwill and identifiable intangible assets relate to the airline segment. Delta applies a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Delta assesses the value of the goodwill and indefinite-lived assets under either a qualitative or quantitative approach. Under a qualitative approach, Delta considers various market factors, including the key assumptions listed below. Delta analyzes these factors to determine if events and circumstances have affected the fair value of goodwill and indefinite-lived intangible assets. If Delta determines that it is more likely than not that the asset may be impaired, Delta uses the quantitative approach to assess the asset's fair value and the amount of the impairment. Under a quantitative approach, Delta calculates the fair value of the asset using the key assumptions listed below.

Delta values goodwill and indefinite-lived intangible assets primarily using market capitalization and income approach valuation techniques. These measurements include the following key assumptions: (1) forecasted revenues, expenses and cash flows, (2) terminal period revenue growth and cash flows, (3) an estimated weighted average cost of capital, (4) assumed discount rates depending on the asset and (5) a tax rate. These assumptions are consistent with those hypothetical market participants would use. Since Delta is required to make estimates and assumptions when evaluating goodwill and indefinite-lived intangible assets for impairment, actual transaction amounts may differ materially from these estimates.

Changes in certain events and circumstances could result in impairment or a change from indefinite-lived to definite-lived. Factors which could cause impairment include, but are not limited to, (1) negative trends in Delta's market capitalization, (2) reduced profitability resulting from lower passenger mile yields or higher input costs (primarily related to fuel and employees), (3) lower passenger demand as a result of weakened U.S. and global economies, (4) interruption to Delta's operations due to a prolonged employee strike, terrorist attack or other reasons, (5) changes to the regulatory environment (e.g., diminished slot restrictions or additional Open Skies agreements), (6) competitive changes by other airlines and (7) strategic changes to Delta's operations leading to diminished utilization of the intangible assets.

Goodwill

When Delta evaluates goodwill for impairment using a quantitative approach, Delta estimates the fair value of the reporting unit by considering both market capitalization and projected discounted future cash flows (an income approach). If the reporting unit's fair value exceeds its carrying value, no further testing is required. If, however, the reporting unit's carrying value exceeds its fair value, Delta then determines the amount of the impairment charge, if any. Delta recognizes an impairment charge if the carrying value of the reporting unit's goodwill exceeds its estimated fair value.

Identifiable Intangible Assets

Indefinite-lived assets are not amortized and consist of routes, slots, the Delta tradename and assets related to SkyTeam and collaborative arrangements. Definite-lived intangible assets consist primarily of marketing and maintenance service agreements and are amortized on a straight-line basis or under the undiscounted cash flows method over the estimated economic life of the respective agreements. Costs incurred to renew or extend the term of an intangible asset are expensed as incurred.

Delta assesses the indefinite-lived assets under a qualitative or quantitative approach. Delta analyzes market factors to determine if events and circumstances have affected the fair value of the indefinite-lived intangible assets. If Delta determines that it is more likely than not that the asset value may be impaired, Delta uses the quantitative approach to assess the asset's fair value and the amount of the impairment. Delta performs the quantitative impairment test for indefinite-lived intangible assets by comparing the asset's fair value to its carrying value. Fair value is estimated based on (1) recent market transactions, where available, (2) the royalty method for the Delta tradename (which assumes hypothetical royalties generated from using the tradename) or (3) projected discounted future cash flows (an income approach). Delta recognizes an impairment charge if the asset's carrying value exceeds its estimated fair value.

Source: Delta Air Lines Inc., Annual Report

Delta Air Lines Inc., Statement of Financial Position, Goodwill and Intangible Assets

Source: Based on data from Delta Air Lines Inc. Annual Reports

Delta Air Lines Inc., adjustments to financial data

Delta Air Lines Inc., adjusted ratios

2017 Calculations

2017 Calculations

2017 Calculations

2017 Calculations