The depreciation rules adopted by firms determine the amounts of charges they report on their assets which affects the value reported on such assets. In this analysis, the focus will be examining the financial report of Delta Airlines to determine its depreciation method for property, plant and equipment. The analysis will also examine an alternative depreciation method for the company that may be used to record charges on property, plant and equipment. A review of the notes to the financial report will also be examined to identify major improvements that may be made in the disclosures for property, plant and equipment.
Basically, Delta Airlines was formed as a crop dusting service company in 1924. The company was founded by Collet Everman …show more content…
The decline in assets turnover indicates that the asset’s revenue generating ability of Delta Airlines declined which indicates a fall in operational performance of the firm. This could also be interpreted in regard to the 5.5 percentage increase in the property, plant and equipment. That is, some property, plant and equipment assets were yet to be put into active use to generate revenues. The acquisition of the property, plant and equipment was not commensurate with their active use. However, the increase on return on assets is positive which means that the company is generating incomes from its assets and other sources or that the expenses of the firm had declined. The decline in debts-assets ratio is positive since it signifies a decline in the liabilities of the firm over the years 2012 and 2013. This implies reduced possibilities of financial distress of the firm. It also means that the assets acquired during the period were financed on cash or other basis rather than …show more content…
This is due to the fact that the method will allow the airlines to change depreciation based on the reduced value of the asset rather than the underlying historical costs. Ideally, the nature of most of the assets of Delta Airline’s such as engine aircrafts reduce in value each year as they are put into use. Consequently, charging depreciation based on the reduced balance value of the asset will enable the firm report fair value depreciation rather than the current straight-line method in which depreciation is based on the historical value (Accountingdetails.com, 2016). The use of straight-line depreciation allows the company to charge a higher depreciation cost on the property, plant and equipment which can be minimized by the use of the reducing balance method. This will enhance fair depreciation charges on property, plant and equipment of the
Basically, Delta Airlines was formed as a crop dusting service company in 1924. The company was founded by Collet Everman …show more content…
The decline in assets turnover indicates that the asset’s revenue generating ability of Delta Airlines declined which indicates a fall in operational performance of the firm. This could also be interpreted in regard to the 5.5 percentage increase in the property, plant and equipment. That is, some property, plant and equipment assets were yet to be put into active use to generate revenues. The acquisition of the property, plant and equipment was not commensurate with their active use. However, the increase on return on assets is positive which means that the company is generating incomes from its assets and other sources or that the expenses of the firm had declined. The decline in debts-assets ratio is positive since it signifies a decline in the liabilities of the firm over the years 2012 and 2013. This implies reduced possibilities of financial distress of the firm. It also means that the assets acquired during the period were financed on cash or other basis rather than …show more content…
This is due to the fact that the method will allow the airlines to change depreciation based on the reduced value of the asset rather than the underlying historical costs. Ideally, the nature of most of the assets of Delta Airline’s such as engine aircrafts reduce in value each year as they are put into use. Consequently, charging depreciation based on the reduced balance value of the asset will enable the firm report fair value depreciation rather than the current straight-line method in which depreciation is based on the historical value (Accountingdetails.com, 2016). The use of straight-line depreciation allows the company to charge a higher depreciation cost on the property, plant and equipment which can be minimized by the use of the reducing balance method. This will enhance fair depreciation charges on property, plant and equipment of the