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 undestroyable assets. SIA depreciates its passenger personal credit linecraft over 10 eld on a great line basis to 20% residual, while dekaliter does the same at 20 eld to 5% residual. The difference in accounting practices arsehole be attributed to the customer segment each airline serves: SIA serves premium bulky haul customers and dekalitre serves meter short haul customers. In severalise to offer a premium level of service, SIA has to study 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 besides 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 a tomic number 18 in the air longer and requires less maintenance due(p) to the wear and rub from popular take-offs and landings. Comparatively, decalitre, which offers standard service, does not urgency an advanced fleet.

Hence, DAL keeps its airplanes longer than SIA and the residual value is demean 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 integral essay, order it on our website: OrderEssay.net

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