International Airline Financial Statements   Term Paper ID:37004 Click to get this paper

Essay Subject: This report will compare the accounting policies and quality of earnings between five different ...... More...

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Paper Abstract: This report compares the accounting policies and quality of earnings between five different airlines: Alaskan Airlines of the U.S., Cathay Pacific Airlines Ltd. Of Hong Kong and China, Turkish Airlines of Turkey, Qantas Airlines of Australia, and Emirates Airline of Dubai. Paper Introduction: Five International Airline Financial Statements This report will compare the accounting policies and quality ofearnings between five different airlines Alaskan Airlines of the U S Cathay Pacific Airlines Ltd Of Hong Kong and China Turkish Airlines ofTurkey Qantas Airlines of Australia and Emirates Airline of Dubai All of the companies were audited and received unreserved opinions The four foreign companies used International Financial ReportingStandards while Alaskan Airlines used U S generally accepted accountingprincipals Alaskan The Alaskan Airlines auditor\'s report was alsothe only Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. The biggest challenge of this company tofinancial reporting is the hyperinflationary economic environment in whichthe company does business (Turkish 56). This was a major blow to thecomparability of Alaskan Airlines financial statements and their foreigncompetitors. currency (Turkish 44). Cathay Pacific's financial statements seemed to be designed to makethe company's managers look good. Residual values were low, at most 1 %(Emirates 65). Both include supporting statements anddisclosure about the types of accounting used. dollar is losing value inrelation to the Turkish Lira (Turkish 56), restating the cost of theaircraft on an inflationary basis will make the carrying cost higher thanthe market rate. Because the U.S. All of this detail did not make the statements easier to read,however. There was no mention of inventory of fuel orparts. Depreciation is conservatively done on straight-line over relatively short terms, with residual value only on aircraft andengines (Turkish 58). Hedges were oftenincluded in prepaid expenses (Alaskan 47). This would result in an asset gain purely on arevaluation basis. They were addressed to the Government of Dubai,suggesting that the intended primary users were already familiar with thebusiness conditions the company faced. currency. Inthe U.S. Though the statements certainly comply with reportingprocedures, there is little in the presentation to help one judge theaccuracy of the calculations. Assets and expenses were often lumped together. generally accepted accountingprincipals" (Alaskan, 86). Gaines and losses on fuel hedges wererecognized when the fuel was purchased (Cathay 36). Turkish Airlines and Qantas Airlines included elaborate ratio analysis,while Alaskan only included those required by the 1 -K. So instead the company uses the market rate in U.S.dollars as the value of these assets and then translates the amounts backto the homeland currency (Turkish 58). The general feel from Emirates is that they were prepared in a solidand conservative manner. There were several accounting choices that focused on a long-termoutlook in financial reporting. The Alaskan Airlines auditor's report was alsothe only one to report on the internal controls of the company. Five International Airline Financial Statements This report will compare the accounting policies and quality ofearnings between five different airlines: Alaskan Airlines of the U.S.,Cathay Pacific Airlines Ltd. Retirement benefits, frequent flyer miles, and borrowingswere explained but not documented in numbers. Cathay reported the residual value ofassets that are depreciated, which was unique to them. The quality of earnings is not particularlyhigh for these financial statements.Summary The statements with the highest quality of earnings are AlaskanAirlines and Turkish Airlines. Keeping residual values high and recognizingrevenue from frequent flyer miles purchased by other companies (Cathay 37)make assets and revenues higher. There is also much information aboutindividual segments. The company's commitment to the spirit of theaccounting rules as well as the rules suggests that the quality of theearnings presented by this company is very high.Qantas Airlines There were very few supporting schedules included in the notes ofQantas Airline's. Frequent flyer miles are deferred and recognized when redeemed.The amounts are disclosed in the notes (Alaskan 63). The depreciation of aircraft was over 15 years, though again theaircraft were not all alike. Compared to the other companies, Cathay'sincome figures are less conservative, and therefore less reliable.Emirates Emirates had very short financial statements, free in general frommanagement discussion. Also, long-term debtis revalued at market values by a contra account each year (Cathay 36). Now the "market value" of some aircraft isdetermined in U.S. All questionable accounts, including inventory,fixed assets, lease obligations, and employee benefits, have detailedsupporting schedules. Finally, all commercial aircraft were depreciated usingstraight-line over 2 years, and freighter aircraft over 2 -27 years,regardless of the model (Cathay 35). For example, Turkey is importing large amounts ofU.S. All of the companies were audited and received unreserved opinions.The four foreign companies used International Financial ReportingStandards, while Alaskan Airlines used "U.S. Of Hong Kong and China, Turkish Airlines ofTurkey, Qantas Airlines of Australia, and Emirates Airline of Dubai. Yet simply restatingis not always accurate. This means restating priorstatements every year for comparability (Turkish 56). Cathayused the term "Fair and True" value of accounts and estimates, and TurkishAirlines said "presents fairly" (Turkish 49), as opposed to the standard"free of material misstatements" used by the others, but clearly indicatesthat the responsibility for the statements belongs to the Board ofDirectors.Cathay Airlines Cathay Airlines had a financial statement that reported very heavilyon the people running it. This company obviously puts a great amount of effort into financialstatement preparation. There was plentyof room for income manipulation in what the statements did not say.Alaska Airlines Compared to the other countries, the disclosures of Alaska airlinesseemed extremely detailed. Everything included seemed to be involved in meeting regulations. However, there was not enough informationincluded to make judgments about the quality of earnings. Revaluing long-term debt in aninflationary environment, delaying the recognition of gains and losses onhedges, and depreciating assets over long periods generally minimizeliabilities and expenses. it is assumed that the market value of long-term debt isirrelevant, but instead the implicit interest rate of the original sale isapplicable. Inventory includes Aircraft Maintenance Partsand Fuel Reserves (Alaskan 61). Furthermore, onecould not get over the fact that Alaskan Airlines used a different set ofaccounting standards than the others. This is in contrast toadjusting their reported value on the balance sheet. Equipment is done on a straight-linebasis, with listings of useful lives, but there is no mention of endingvalue. Though the quality of earnings was probably quite high, thisquality came at a high price of readability and comparability.Turkish Airlines Turkish Airlines is a public company owned about 75% by the Turkishgovernment (Turkish 55). They itemize many aspects of the employment status ofthe high-level executives, everything from stock options to accumulatedvacation time (Qantas 64-75). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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