Depreciation at Delta

Depreciation at Delta - Depreciation at Delta Air Lines and...

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Depreciation at Delta Air Lines and Singapore Airlines UAA – ACCT 650 - Seminar in Executive Uses of Accounting Dr. Fred Barbee
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Financial Reporting D e p i r c a t o n
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Yeah! MB A
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MBA
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5 Why study this case? To “compare and contrast” depreciation assumptions from two airlines that . . . Are in some ways alike, and In other ways vastly different
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6 Why Look at an Airline? PP&E for airlines usually comprise greater than 50% of total assets. Aircraft of one airline are substantially similar to aircraft of another airline (at least to the lay person).
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Depreciation – The Concept 1
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Time Consumed as Depreciation Expense
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Depreciation is not an attempt to establish the value of an asset. Depreciation is not a measure of the decline in value of an asset.
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11 Depreciation Defined The process of allocating the cost of property, plant, and equipment as an expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
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Depreciation B E G I N N I N G E N D I N G Life of the Asset 96 97 98 99 00 01 02 03 04 05 Depreciation is a process of allocation , not valuation.
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13 Cost Allocation Acquisition Cost Balance Sheet Income Statement Expense Depreciation Unused Used An application of the matching                     principle.
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14 Income Statement Depreciation Expense Depreciation for the current year Balance Sheet Accumulated Depreciation Total depreciation to date of balance sheet Depreciation
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Long-Term Assets
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16 Long-Term Assets Have a useful life of more than one year. Are acquired for use in the business. Are not intended for resale to customers. Are reported at carrying (book) value.
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Management Issues related to Accounting for Long Term Assets
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18 Management Issues The cost of the asset must be measured . The depreciable life of the asset must be estimated .
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19 Management Issues The salvage value of the asset at the end of its life must be estimated A pattern for recognizing depreciation over the depreciable life of the asset must be selected.
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Issues Related to Long-Lived Assets Asset Service Potential Acquisition Disposal Use in business operations Time Decline in future service benefits. Book Value Accounting Issues Measuring Cost Recording Disposals Allocation of cost Accounting For post acquisition expenses.
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Issues Related to Long-Lived Assets Asset Service Potential Acquisition Disposal Use in business operations Time Decline in future service benefits. Book Value Accounting Issues Measuring Cost Recording Disposals Allocation of cost Accounting For post acquisition expenses.
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Acquisition cost of Property, Plant, and Equipment Fundamental Issue #1: What is the value of the asset?
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Measuring the Carrying Amount of Long-Lived Assets 1
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24 Expected Benefit Approach Recognizes that assets are valuable because of the future cash inflows they are expected to generate.
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This note was uploaded on 04/04/2011 for the course ACCT 5010 taught by Professor Fischer during the Spring '11 term at Kean.

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Depreciation at Delta - Depreciation at Delta Air Lines and...

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