a) Ownership of the fleet is a specific characteristic that will determine the depreciation policy, with some aircraft being acquired and some leased from manufacturers. In the financial year 2013/2014, Qantas “purchased 17 aircraft and leased six aircraft” (Qantas Airways Limited 2014). They have sole ownership of acquired aircraft and engines and therefore depreciate over the aircraft’s useful life (AASB 116 paragraph 6). Qantas’ depreciation policy for leased aircraft differs depending on classification as an operating or finance lease. For an operating lease, the figures are charged directly to the income statement as a yearly expense and therefore would not be tested for depreciation. Assets are considered a finance lease when they meet requirements in paragraph 10 (AASB 117). A finance lease depends on whether the aircraft is returned back to the lessor or remains with the lessee, as to the length of time the asset is depreciated
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Qantas has to alter its depreciation methods, whilst following the straight-line basis, to account for the variation of useful lives that each component possesses, in order to obtain the final depreciation expense figure for their aircraft and engines. For example, KPMG (2007) disclosed that aircraft spare parts had a useful life of 15-20 years and Qantas reported the useful life of passenger aircraft and engines and freighter aircraft engines was 2.5-20 years. (Qantas Airways Limited, 2014)
b) Impairments of $328 million associated with property, plant and equipment was classed as an asset held for sale. (Qantas Airways Limited, 2014). AASB136 paragraph 3 states that impairment “does not apply to assets classified as held for sale” meaning that Qantas were able to defer the recognition of impairment losses on its aircraft. This is because there is only a gain or loss on disposal that can arise from assets held for sale as opposed to using the recoverable
Qantas has to alter its depreciation methods, whilst following the straight-line basis, to account for the variation of useful lives that each component possesses, in order to obtain the final depreciation expense figure for their aircraft and engines. For example, KPMG (2007) disclosed that aircraft spare parts had a useful life of 15-20 years and Qantas reported the useful life of passenger aircraft and engines and freighter aircraft engines was 2.5-20 years. (Qantas Airways Limited, 2014)
b) Impairments of $328 million associated with property, plant and equipment was classed as an asset held for sale. (Qantas Airways Limited, 2014). AASB136 paragraph 3 states that impairment “does not apply to assets classified as held for sale” meaning that Qantas were able to defer the recognition of impairment losses on its aircraft. This is because there is only a gain or loss on disposal that can arise from assets held for sale as opposed to using the recoverable