NOTE 1 - RECENTLY ISSUED ACCOUNTING STANDARDS

The Company adopted 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 March 31, 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 first quarter of 2017 (in millions, except per share amounts):


	Three Months Ended March 31, 2017
	As Previously Reported		New Revenue Standard Adjustments		New Retirement Standard Adjustments		As Adjusted
Passenger revenue	$	7,174	$	479	$	—	$	7,653
Cargo		220		18		—		238
Other operating revenue		1,026		(491)		—		535
Total operating revenue		8,420		6		—		8,426

Salaries and related costs		2,661		—		(25)		2,636
Distribution expenses		307		12		—		319
Other operating expenses		1,332		(23)		—		1,309
Total operating expenses		8,142		(11)		(25)		8,106

Operating income		278		17		25		320

Interest expense		(150)		(12)		—		(162)
Miscellaneous, net		(17)		—		(25)		(42)
Total nonoperating expense, net		(133)		(12)		(25)		(170)

Income before income taxes		145		5		—		150
Income tax expense		49		2		—		51
Net income		96		3		—		99

Earnings per share, basic and diluted		0.31		0.01		—		0.32

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) (“ASU 2016-01”) 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 adoption did not have a material impact on our financial statements. See Note 4 and 7 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. It 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 completed our evaluation of the impact but believe this standard will have a significant impact on our consolidated balance sheets but 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 its operating leases.