Hi guys, it would be really helpful if you told me what depreciation of flight equipment means as I have a new airline and keep getting this popping up on my income statement.
Many Thanks :)
there is this incredible thing out there called google/wikipedia/the internet...
http://en.wikipedia.org/wiki/Depreciation
and it happens to mean exactly the same thing in AS as is explained in the first three lines of the article.
Sorry, I still don't understand it, could you explain?
Thanks!!
I agree to yukawa, the wiki article is quiet well explained.
It is the costing-based allocation of costs of assets i.e. aircrafts (or buildings) over the time they are used.
You will see depreciation in your PLA as well as with the flight costing, while it hasn’t got an effect on your cashflow.
So, in other words, if you buy a chocolate bar for 1$ and eat every day 1/10 of this, the daily depreciation would be 10 ct., while you normally would pay the 1$ at the first day.
Oh ok thanks a lot!!
The Depreciation in AS accounting would make sense only if we were having to pay taxes in-game Because we do not, accounting should be simply cash based with no depreciation involved. It is pointless under current setup. It only affects net profit and dividends paid, but your cash flow is still the same.
@ rubiohiguey
since depreciation affects your balance sheet, it also affects your rate of interest and the availability of loans.in AS
The Depreciation in AS accounting would make sense only if we were having to pay taxes in-game Because we do not, accounting should be simply cash based with no depreciation involved. It is pointless under current setup. It only affects net profit and dividends paid, but your cash flow is still the same.
Hi,
perhaps you are interested in a seven year old Peugeot 407 ? Privately owned, never been deducted from taxed income, so no depreciation of course :P
What I mean to say is that although we don't need to discuss with the tax office over how many years we shall write our planes off, they do depreciate over time. Wouldn't you agree ? On the other hand, I shall gladly sell you some three year old 73G's and 739's at 46.5 million and 62 million a piece.
Jan
If you have to pay at the week-closure your shareholde, you are also interested to have the depreciation ;)
Also, if you replace seats, the price of your old seats will be listed as depreciation as you are essentially writing them off.
well it is not totally related to tax. Depreciation is only a mean to make sure that the balance sheet is reflecting the actual asset of the company as close as possible. If the loss is only reflected when the asset is disposed or sold, then a huge loss might incur in the profit and loss statement. So with depreciation, the loss (expected) is spread out and not focused to affect the statement at a certain point of time.