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Essay / Research Paper Abstract
This 10 page paper examines a case study supplied by the student. Delta Airlines have emerged from bankruptcy and chosen to use a fresh start accounting approach as allowed under American Institute of Certified Public Accountant Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (SOP 90-7. The paper considers the way this is impacting on asset valuation and how it impacts on the firm. The practice of deprecation discussed and the paper ends by considering whether or not fresh start should be available to other firms where the balance sheet does not reflect the real value of the assets. The bibliography cites 4 sources.
Page Count:
10 pages (~225 words per page)
File: TS14_TEdeltafresh.rtf
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Unformatted sample text from the term paper:
of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (SOP 90-7). The result was to increase the net profit by $127 million and decrease assets
by a total of $1 billion. The approach is discussed and the paper ends with a consideration whether or not this is an approach would be opened up to all
firms where the balance sheet is not reflective of the true value of the firm. 1. Introduction Delta have emerged from bankruptcy a year early, they are being aided
with the use of some accounting tools that are helping their profit levels to appear higher than under the accounting systems that were used prior to 2007. This has reduced
the depreciation burden through the use of the fresh start tool. The value of this along wit the way that fresh start can be considered by looking at aircraft and
the way that are valued, and then considering if this is a tool that should be available to all firms. 2. Reassessment of Asset Lives There are a number
of reasons Delta may have chosen to extend the lives of the equipment. The first is the impact that this would have on the accounts. The way that depreciation works
is based in spreading the cost of a piece of equipment over the useful life, so that the cost is matched to the use of the equipment. The basic concept
of this is the matching concept, matching cost to revenue production. The amount that is depreciated each year is deducted from the profit figure. It is a theoretical cost
only as the money has already been paid and the cost has already occurred in terms of cash flow. The decision regarding depreciation determines the level of decrease that is
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