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Essay / Research Paper Abstract
This 3 page paper looks at a case study supplied by the student and considers how the Delta Airline debt and deprecation of the fleet would be restated is calculated in the same way as Singapore Airlines. All calculations are shown.
Page Count:
3 pages (~225 words per page)
File: TS14_TEdeltdep.rtf
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Unformatted sample text from the term paper:
to the way they interpret elements such as deprecation and apply this to their annual accounts. If we look at Delta and Singapore airlines there are some very different
assumption in terms of the debt and the deprecation. We can look at each of these individually and assess the impact they would have on the categories and the balance
sheets. Both companies use capital leases. These are leases that have a liability to make payments in the future. However Singapore Airlines make use of a different accounting approach. Rather
than calculate the capital leases as long term debt, they do not need to be classified as debt as the $2.8 million was matched by a deposit of $2.8 million
placed on deposit specifically to meet these future obligations. Looking at Delta Airlines, if the long term debt is assumed to all be capital leases this would also disappear,
reducing the capital structure of the company to 0% debt, (operating leases are classified as outgoings and not long term debts), however there would also need to be the impact
of the placement of the amount that would match the liability on deposit. However, this would still be an asset, so the debt would be the main change. However, as
we are told debt is 3717, and the capital assets under lease amount to 173, it is likely this debt is for other items as well in which case the
debt would be reduced to 3717- 173 = 3544 Next we need to look at how the depreciation is different. Delta Airlines are now deprecation aircraft on an straight line
basis, with an assumption of a residual value of 5% and assumes a twenty year life. Singapore has a different depreciation, with an assumed ten-year life and residual value of
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