Search Case 3: Overstated depreciation for long-term assets In 2009 Lufthansa, the German national airline,...

 

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Search Case 3: Overstated depreciation for long-term assets ➤ In 2009 Lufthansa, the German national airline, reported that it depreciated its aircraft over 12 years on a straight- line basis, with an estimated residual value of 15 percent of initial cost. Air France-KLM, an airline formed in 2004 by the merger of the French airline Air France and the Dutch airline KLM, is one of Lufthansa's main competitors. In contrast to Lufthansa, Air France-KLM reported that its aircraft depreciation was also estimated using the straight- line method but assuming an average life of 20 years and no residual value. Case 3: Overstated depreciation for long-term assets Lufthansa reported in its 2009 Annual Report the total cost of its aircraft at the beginning of 2009 as 17,918 million and that accumulated depreciation was 10,547 million. ▸ What if Lufthansa used the same useful life and salvage estimates as Air France-KLM? What would be the effect on 2009 financial statements (assuming that they maintain their method for tax purposes; tax rate=25%)? Search Case 3: Overstated depreciation for long-term assets ➤ In 2009 Lufthansa, the German national airline, reported that it depreciated its aircraft over 12 years on a straight- line basis, with an estimated residual value of 15 percent of initial cost. Air France-KLM, an airline formed in 2004 by the merger of the French airline Air France and the Dutch airline KLM, is one of Lufthansa's main competitors. In contrast to Lufthansa, Air France-KLM reported that its aircraft depreciation was also estimated using the straight- line method but assuming an average life of 20 years and no residual value. Case 3: Overstated depreciation for long-term assets Lufthansa reported in its 2009 Annual Report the total cost of its aircraft at the beginning of 2009 as 17,918 million and that accumulated depreciation was 10,547 million. ▸ What if Lufthansa used the same useful life and salvage estimates as Air France-KLM? What would be the effect on 2009 financial statements (assuming that they maintain their method for tax purposes; tax rate=25%)?

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For buy thank Yer 2009 Highl Life of the Airsaft 12 yeare Method of Depreciation gr... View the full answer