Depreciation at delta airlines singapore airlines solution to case 2

It will offer customers a compelling value proposition: a high level of service and comfort at 50 percent of the current published business-class.

Papers No Comments 1. Merle, MBA February 27, Emma Waage Roarke Stone Tim Gould Introduction Depreciation expense is the way that the use of an asset is matched with the revenue that is generated from the asset on the income statement during the time period being reported.

However, this result is deceiving because it only considers the total assets relative to that year. Singapore Gains: There is a tax benefit to depreciating assets more rapidly through lowering the net income annually. Analysis: The overall strategy of Singapore Airlines may be related to their commitment to maintaining their high rankings for customer service amongst business commuters. Taken these assumptions as given, it would be proper to have different depreciation schedules for the two companies. Some of the differences in the method chosen for depreciation can be based on the use and maintenance schedule of the fleet. As stated in the case, it is difficult to compare over airlines within the industry due to different depreciable lives and fleet ages. The report provides critical assessment of the company's overall performance, assessment that would be relevant and meaningful to shareholders.

Both use a straight line depreciation method to depreciate the value of the fleet on the Balance Sheet. The rapid depreciation schedule and relatively high salvage value may be due to???

depreciation at delta airlines and singapore airlines (a) pdf

However, as noted in the computations above, Singapore depreciates the value of its fleet twice as fast. By continuously focusing on the needs of the premium-class business traveller, SkyTrails will provide the best value proposition in the markets it serves.

The accounting policies reflect the airlines position in determining which accounting methods they deem suitable to maximize profitability.

why does delta airlines use a different depreciation policy relative to singapore airlines

As noted in the case text, Delta was reporting losses in other areas and wanted to improve their overall earnings through lessening the affect of fleet depreciation expense.

If this is not true and the planes stay in service, the company can also expect a future increase in net income as the asset has been fully expensed. Analysis: The overall strategy of Singapore Airlines may be related to their commitment to maintaining their high rankings for customer service amongst business commuters.

Some of the differences in the method chosen for depreciation can be based on the use and maintenance schedule of the fleet. The accounting policies reflect the airlines position in determining which accounting methods they deem suitable to maximize profitability. Delta may have wanted to reduce depreciation expense recorded on the Balance Sheet and therefore increase the depreciation period to reduce the annual expenditure. Both use a straight line depreciation method to depreciate the value of the fleet on the Balance Sheet. In the chart below, you will see the amount of total asset value that has been depreciated as of Merle, MBA February 27, Emma Waage Roarke Stone Tim Gould Introduction Depreciation expense is the way that the use of an asset is matched with the revenue that is generated from the asset on the income statement during the time period being reported. Two major airlines have been selected to provide competitor comparison throughout this report.

Currently Delta depreciates over 20 years and Singapore depreciates over 10; a significant difference.

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Delta and singapore analysis