Yellow Aviation is an existing client of PPP Partners. The auditors are aware that the impacts on airlines of the recent terrorist attacks and the global recession have been severe, with predictions of a prolonged downturn. Also, the entry of new competitors in the domestic and international markets has prompted some airlines to heavily discount flights on some routes. The client’s policies include the following:

Aircraft maintenance costs policy The standard cost of major airframe and engine maintenance checks is capitalised and depreciated over the shorter of the scheduled usage period to the next major inspection or the remaining life of the aircraft.

Yellow Aviation’s latest financial data show the aircraft and engines at cost (including major maintenance costs) to be at a similar level as last year while depreciation costs have decreased by 7 per cent.

Required

(a) What key assertions for the above accounts are likely to be affected?

(b) Explain what evidence would be persuasive in this case.