Contemporary Issues In Accounting Airways †Myassignmenthelp.Com

Question: What Is The Contemporary Issues In Accounting Airways? Answer: Introduction JetStar a brand under Qantas Airways is recognised to be one of the low-cost airline operators in Australia. JetStar alone is accountable for carrying more than 8.5% of passenger around Australia. They are seen to operate based on extensive international and home network from Melbourne airport. Some of the main fleet of the airline operator has been identified with family of Airbus A320 and Boeing 787 Dreamliner (Qantas.com. 2017). Virgin Australia Airlines is recognised as second largest in terms of size after Qantas Airways. This airline companies seem to be based in Bowen Hills in Brisbane. It was established in 1999 and recognised to operate in a single route. Since then the airline carrier has been able to expand across 29 cities operating in areas like Brisbane, Adelaide, Melbourne and Sydney (Virginatlantic.com. 2017). The study aims to show the present accounting framework and check whether the financial report complies with the requirement of the prescribed standard. The study has further introduced prudence to access possible disparity in the reporting. Some of the main considerations in the report have been made from annual general meeting report, intangible assets and tangible assets. The latter part of the report had been able to show the reason for shareholders to invest. Conceptual framework of Accounting for both the companies The conceptual framework of the accounting standard has been seen in terms of AASB and Corporations Act 2001. For both the companies, the financial declaration is prepared based on IFRS. The aforementioned standards are issued by international accounting board. The main considerations in the financial statements of both Jetstar Airways and Virgin Australia Airlines is based on past cost evaluation except in areas where assets and liabilities needs to be considered as per fair value and areas where these are stated as per relevant accounting policies (Aparicio, Bacao and Oliveira 2016). The conceptual framework for revenue recognition is based as per AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. However, the new standard of AASB 15 Revenue from contracts with the customers is set to replace the existing ones and the new implementation date is set as in the commencement of annual reporting period on or after 1st January 2018. The company has further seemed to decide whether they will be able to restore the existing standard of AASB 117 for leases and modify the framework based on AASB 16. AASB 136: Impairment of Assets has further thing to be applicable for recognising impairment of assets and the various types of financial guarantees are considered as per AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Prudence theory applied in both the companies The theory of prudence implied that none of the companies has been seen to overestimate the revenues. Virgin Australia Airlines and Jetstar have been seen to apply the prudence concept in their financial information. This is obvious with the conservative nature of recording the assets and not underestimates the liabilities. The financial statements have been further able to take into consideration with probable transactions. The important aspect of prudence has been able to show that the company has not applied AASB 15 Revenue from Contracts with Customers (AASB 15) and AASB 16 Leases (AASB 16), and it is sure about replacing the existing standards. In order to test the viability of the methods both the companies have decided to set the effective date of implementation of the standards on or after 1 January 2018. In addition to this the company has decided to test the new method of recognition of leases and then only adopt the same on or after 1 January 2019. All the different types of other considerations influence has been depicted with regular review of the assets and assessing the reasons for declining the values for the same. In general, the important aspect of prudence among both the companies has been identified with not writing off the values associated to fixed assets (Stilgoe, Owen and Macnaghten 2013). Criteria followed for financial data Total Assets- It has been seen that the sum asset of Qantas Airways is $ 17708 m in 2016, while the total asset of Virgin Australia is $ 6886.9 m in 2016. Furthermore, Virgin Australia is not seen to have any contingent liability are assets as that 30 June 2016. For Qantas Airways Ltd the assets has been classified to be held for sale and measured at fair value less cost of selling. The various types of net benefits of Qantas Airways have been further seen to be measured under fair value of plant assets less the present value. The important consideration for preparation of Business statements of Virgin Australia has been seen with assets held under financial leases to be recognised at fair value (Guthrie and Pang 2013). Tangible Assets and Intangible Assets- Qantas Airways recognises intangible and tangible assets based on non-current tangible assets and classified them under revenue generation used under recoverable amount of the assets. The intangible assets are seen to be considered for impairment losses less cost. The determinations of the amortisation are considered as per the residual life and useful life on the reporting date. The assets taken into consideration for indefinite lives are not considered for impairment and these are seen to be done on annual basis (Qantas.com.au. 2017). Depreciation Qantas Group is seen to recognise the depreciation as per straight line basis for PPE except for freehold land. The various types of the depreciation rate owned by the assets are calculated based on the total valuation cost and residual values of the expected useful life of the assets. The depreciation on the assets are further seemed to be charged based on acquisition date and internally constructed assets over the early many useful life. The assets which are held under financial leases are depreciated for the appropriate amount in which Qantas Group is having the ownership to do so (Kober, Lee and Ng 2013). In a similar fashion depreciation and amortisation of the assets for Virgin Airlines are considered from the date they are considered for selling. The depreciation of the property plant and equipment is further seemed to be stated as per cost less accumulated depreciation and impairment losses. Comparable to Qantas Airways, Virgin Airlines as in all so able to recognise the depreciation of its assets based on straight line and estimate the same with useful life of the residual value (Jouini, Napp and Nocetti 2013). Rationale for the shareholders investing in the companies The various highlights of the directors announcement have been taken into consideration for stating the rational of the shareholders investing in both the organisations. Based on the report published by Virgin Airlines, the companys revenue has been seen to increase from $4,749.2 million to $5,021.0 million. The comparative period has depicted that the total equity has been accounted as 60% coming from Tigerair Australia in 16 October 2014. The investors should particularly look forward to the rising net operating expenditure as $4,802.7 million to $5,278.7 million, which is being seen as a negative sign for the company. The aforementioned aspects have been seen to be brnrficial for investing in Virgin Airlines (Better Evaluation 2014). Built on the CEOs reprot in the annual report of 2016, the group has been significantly able to contribute with soaring high figures in the financial year 2015-16. The total increase in the economic performance has been evident with rising operating margin which has been recognising terms of EBIT for Jetstar Group, Qantas Loyalty, Qantas International and Qantas Domestic. Two thirds of the total salary of the group has been seen to be based on international operations, portfolio strategy and loyalty business. Investors should particularly look forward to the increasing profit before tax from $ 975 m in 2015 to $ 1532 in 2016 (Grant and Osanloo 2014). Built on the financial analysis of both the companies it can be said that Jetstar (Qantas) is not only in better position than Virgin Airlines in terms of revenue but has been able to keep the operating expenditure at lower level, this makes it a better choice than the latter (M?ciuc?, Hlaciuc and Ursache 2015). Conclusion The report have been able to state on the present accounting framework of both Qantas Airways and Virgin Airlines. The Study checked the financial report for compliance with the requirement of the prescribed standard. The conceptual framework of the accounting standard has been seen in terms of AASB and Corporations Act 2001. For both the companies, the financial report is prepared based on IFRS. The main considerations in the financial statements of both Jetstar Airways and Virgin Australia Airlines is based on historical cost evaluation except in areas where assets and liabilities needs to be assessed at fair value and areas where these are stated as per relevant bookkeeping policy. The prudence aspect of the report has been evident as none of the companies has been seen to overestimate the revenues. Virgin Australia Airlines and Jetstar have applied prudence in their financial information. This has been considered to be evident with the conservative nature of recording the assets and not underestimates the liabilities. The financial statement has been further able to take into consideration with probable transactions. The most vital aspect prudence has been able to show that the company has not applied AASB 15 Revenue from Contracts with Customers (AASB 15) and AASB 16 Leases (AASB 16), and it is sure about replacing the existing standards. Comparable to Qantas Airways, Virgin Airlines as in all so able to recognise the depreciation of its assets based on straight line and estimate the same with useful life of the residual value. References Aparicio, M., Bacao, F. and Oliveira, T. (2016) An e-learning theoretical framework, Educational Technology and Society, 19(1), pp. 292307. doi: www.jstor.org/stable/jeductechsoci.19.1.292. Better Evaluation (2014) Rainbow Framework, Better Evaluation. Grant, C. and Osanloo, A. (2014) Understanding, selecting, and integrating a theoretical framework in dissertation research: Creating the blueprint for your house, Administrative Issues Journal Education Practice and Research, 4(2), pp. 1226. doi: 10.5929/2014.4.2.9. Guthrie, J. and Pang, T. T. (2013) Disclosure of goodwill impairment under aasb 136 from 2005-2010, Australian Accounting Review, 23(3), pp. 216231. doi: 10.1111/j.1835-2561.2013.00204.x. Jouini, E., Napp, C. and Nocetti, D. 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