Kim Park A

Although Singapore Airlines (SIA) and Delta Airlines ( dal) operate in the equivalent industry, apiece respiratory tract takes a different approach to depreciating lasting assets. SIA depreciates its passenger personal credit linecraft over 10 geezerhood on a great line basis to 20% residual, while dal does the same at 20 old age to 5% residual. The difference in accounting practices fucking be attributed to the customer segment each airline serves: SIA serves premium farsighted haul customers and dekaliter serves meter short haul customers. In severalise to offer a premium level of service, SIA has to commit newer airplanes. Hence, the approximate age of the flash is 5-6 years and is depreciated over a shorter lifespan. By depreciating to a 20% residual value, SIA can also gain a higher(prenominal)(prenominal) level of surplus on the books to help encourage gains on sales. The 20% can also be justify because SIA operates long haul flights, meaning the airplanes atomic number 18 in the air longer and requires less maintenance ascribable to the wear and rub from popular take-offs and landings. Comparatively, dal, which offers standard service, does not neediness an advanced fleet.

Hence, DAL keeps its airplanes longer than SIA and the residual value is spurn because of more frequent take-offs and landings. On further analysis, SIA incurs an $8 dispraise expense for every(prenominal) $100 spent on an airplane and DAL incurs $4.75. From an practicable standpoint, SIA can afford to depreciate at a higher rate because its load factor is greater than DALs (76.8% vs 72.9%). Furthermore, SIAs revenue per passenger is higher than DALs (SIA $667200 0000/15002000=$444, DAL $15657000000/1199300! 00=$130), meaning SIA can weather a higher depreciation rate.If you want to get a replete(p) essay, order it on our website: OrderEssay.net

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