American Airlines 2007 Annual Report Download - page 74

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71
10. Retirement Benefits (Continued)
On December 13, 2007, President Bush signed the Fair Treatment for Experienced Pilots Act (H.R. 4343) into
law, raising the mandatory retirement age for commercial pilots from 60 to 65. Previously, The FAA required
commercial pilots to retire once they reached age 60. As a result of the new legislation, the Company has
estimated the average retirement age for the pilot workgroup to be 63, based on the approximate retirement age
of the Company’s other work groups, which did not have the same mandatory retirement age. This change in the
estimate of pilot retirement age caused a decrease to the pension and other postretirement liability of
approximately $543 million.
On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. SFAS
158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan
assets and the projected benefit obligations) of its pension plans in the consolidated balance sheet as of
December 31, 2006 with a corresponding adjustment to Accumulated other comprehensive income (loss). The
adjustment to Accumulated other comprehensive income (loss) at adoption primarily represents the net
unrecognized actuarial losses and unrecognized prior service costs. Further, actuarial gains and losses that arise
in subsequent periods and are not recognized as net periodic pension cost in the same periods will be recognized
as a component of Accumulated other comprehensive income (loss). These amounts will be subsequently
recognized as a component of net periodic pension cost in Other comprehensive income (loss) in accordance
with the Company’s accounting policy.
The incremental effects of adopting the provisions of SFAS 158 on the Company’s consolidated balance sheet at
December 31, 2006 are presented in the following table. The adoption of SFAS 158 had no effect on the
Company’s consolidated statement of operations for the year ended December 31, 2006, or for any prior period
presented, and it did not affect the Company’s operating results in 2007, nor will it in future periods.
Prior to adopting
SFAS 158
Effect of
adopting
SFAS 158
As Reported at
December 31,
2006
Intangible asset (pension) $ 118 $ (118) $ -
Accrued pension and postretirement
benefits liability
4,657
880
5,537
Total liabilities 28,871 880 29,751
Accumulated other comprehensive
income (loss)
(458)
(998)
(1,456)
Total stockholders’ equity (deficit) 392 (998) (606)