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 September 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 September 30, 2017 (in millions, except per share amounts):



	Three Months Ended September 30, 2017
	As Previously Reported			New Revenue Standard Adjustments			New Retirement Standard Adjustments			As Adjusted
Passenger revenue	$	8,528		$	541		$	—		$	9,069
Cargo	257			22			—			279
Other operating revenue	1,093			(542		)	—			551
Total operating revenue	9,878			21			—			9,899

Salaries and related costs	2,812			—			(27		)	2,785
Distribution expenses	352			25			—			377
Other operating expenses	1,459			(23		)	—			1,436
Total operating expenses	8,786			2			(27		)	8,761

Operating income	1,092			19			27			1,138

Interest expense	(164		)	(5		)	—			(169		)
Miscellaneous, net	15			(1		)	(27		)	(13		)
Total nonoperating expense, net	(112		)	(6		)	(27		)	(145		)

Income before income taxes	980			13			—			993
Income tax expense	343			5			—			348
Net income	637			8			—			645

Earnings per share, basic	2.12			0.03			—			2.15
Earnings per share, diluted	2.12			0.03			—			2.15

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 nine months ended September 30, 2017 (in millions, except per share amounts):



	Nine Months Ended September 30, 2017
	As Previously Reported			New Revenue Standard Adjustments			New Retirement Standard Adjustments			As Adjusted
Passenger revenue	$	24,324		$	1,549		$	—		$	25,873
Cargo	731			59			—			790
Other operating revenue	3,243			(1,573		)	—			1,670
Total operating revenue	28,298			35			—			28,333

Salaries and related costs	8,341			—			(78		)	8,263
Distribution expenses	1,021			60			—			1,081
Other operating expenses	4,199			(73		)	—			4,126
Total operating expenses	25,529			(13		)	(78		)	25,438

Operating income	2,769			48			78			2,895

Interest expense	(472		)	(26		)	—			(498		)
Miscellaneous, net	(3		)	(1		)	(78		)	(82		)
Total nonoperating expense, net	(370		)	(27		)	(78		)	(475		)

Income before income taxes	2,399			21			—			2,420
Income tax expense	848			7			—			855
Net income	1,551			14			—			1,565

Earnings per share, basic	5.06			0.04			—			5.10
Earnings per share, diluted	5.04			0.05			—			5.09

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 "New Lease Standard"). 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. We will adopt this standard effective January 1, 2019. 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 Lease Standard will be to record assets and obligations for our operating leases.