RECENTLY ISSUED ACCOUNTING STANDARDS

The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (the "New Revenue Standard"), effective January 1, 2018 using the full-retrospective method. Topic 606 prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the Company, the most significant impact of the standard is the reclassification of certain ancillary fees from other operating revenue into passenger revenue on the statement of consolidated operations. These ancillary fees are directly related to passenger travel, such as ticket change fees and baggage fees, and are no longer considered distinct performance obligations separate from the passenger travel component. In addition, the ticket change fees, which were previously recognized when received, are now recognized when transportation is provided. Adoption of the standard had no impact on the Company's consolidated cash flows statements.

The Company adopted Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the "New Retirement Standard"), effective January 1, 2018 using the full-retrospective method. The New Retirement Standard requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The Company elected to apply the practical expedient and use the amounts disclosed in Note 5 to the financial statements included in Part I, Item 1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 as the estimation basis for applying the retrospective presentation requirements of the standard.

The new standards had the same impact on the financial statements of United as they had on the financial statements of UAL. The table below presents the impact of the adoption of the New Revenue Standard and the New Retirement Standard on select accounts and captions of the statement of consolidated operations for the three months ended June 30, 2017 (in millions, except per share amounts):



	Three Months Ended June 30, 2017
	As Previously Reported			New Revenue Standard Adjustments			New Retirement Standard Adjustments			As Adjusted
Passenger revenue	$	8,622		$	529		$	—		$	9,151
Cargo	254			19			—			273
Other operating revenue	1,124			(540		)	—			584
Total operating revenue	10,000			8			—			10,008

Salaries and related costs	2,868			—			(26		)	2,842
Distribution expenses	362			23			—			385
Other operating expenses	1,408			(27		)	—			1,381
Total operating expenses	8,601			(4		)	(26		)	8,571

Operating income	1,399			12			26			1,437

Interest expense	(158		)	(9		)	—			(167		)
Miscellaneous, net	(1		)	—			(26		)	(27		)
Total nonoperating expense, net	(125		)	(9		)	(26		)	(160		)

Income before income taxes	1,274			3			—			1,277
Income tax expense	456			—			—			456
Net income	818			3			—			821

Earnings per share, basic	2.67			—			—			2.67
Earnings per share, diluted	2.66			0.01			—			2.67

The table below presents the impact of the adoption of the New Revenue Standard and the New Retirement Standard on select accounts and captions of the statement of consolidated operations for the six months ended June 30, 2017 (in millions, except per share amounts):



	Six Months Ended June 30, 2017
	As Previously Reported			New Revenue Standard Adjustments			New Retirement Standard Adjustments			As Adjusted
Passenger revenue	$	15,796		$	1,008		$	—		$	16,804
Cargo	474			37			—			511
Other operating revenue	2,150			(1,031		)	—			1,119
Total operating revenue	18,420			14			—			18,434

Salaries and related costs	5,529			—			(51		)	5,478
Distribution expenses	669			35			—			704
Other operating expenses	2,740			(50		)	—			2,690
Total operating expenses	16,743			(15		)	(51		)	16,677

Operating income	1,677			29			51			1,757

Interest expense	(308		)	(21		)	—			(329		)
Miscellaneous, net	(18		)	—			(51		)	(69		)
Total nonoperating expense, net	(258		)	(21		)	(51		)	(330		)

Income before income taxes	1,419			8			—			1,427
Income tax expense	505			2			—			507
Net income	914			6			—			920

Earnings per share, basic	2.95			0.01			—			2.96
Earnings per share, diluted	2.94			0.02			—			2.96

The table below presents the impact of the adoption of the New Revenue Standard on UAL's balance sheet accounts and captions as of December 31, 2017 (in millions):



	At December 31, 2017
	As Previously Reported		New Revenue Standard Adjustments		As Adjusted
Prepaid expenses and other	$	1,051	$	20	$	1,071
Total current assets	7,113		20		7,133
Total assets	42,326		20		42,346



Advance ticket sales	3,876	64		3,940
Frequent flyer deferred revenue	2,176	16		2,192
Other	569	7		576
Total current liabilities	12,676	87		12,763

Frequent flyer deferred revenue - long-term	2,565	26		2,591
Deferred income taxes	225	(21	)	204
Total other liabilities and deferred credits	8,145	5		8,150

Retained earnings	4,621	(72	)	4,549
Total stockholders' equity	8,806	(72	)	8,734
Total liabilities and stockholders' equity	42,326	20		42,346

The Company adopted Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10) effective January 1, 2018. This standard makes several changes, including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in earnings. The Company reclassified to retained earnings $7 million of unrealized loss on the Company's investment in Azul, S.A. ("Azul") which was previously classified as an available-for-sale security. See Notes 4 and 7 to the financial statements included in this Part I, Item 1 for additional information.

Accounting for Leases. In February 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842, Leases. The guidance requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840, Leases. The new lease standard is effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted. Lessees and lessors are required to adopt the new lease standard using a modified retrospective approach for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients. We have not finalized our assessment but believe this standard will have a significant impact on our consolidated balance sheets. The standard is not expected to have a material impact on the Company's results of operations or cash flows. The primary effect of adopting the new standard will be to record assets and obligations for our operating leases.