Evaluate whether the cost of re-training/re-certifying pilots, and the cost of preparing aircraft to resume flying can be capitalised (i.e., recorded as an asset), with specific references to the Conceptual Framework for Financial Reporting and to AASB 116 where applicable.

Background info

COVID-19 has caused severe disruptions to the economies. Many companies are operating under significantly different circumstances to those existing 2 yrs ago. Especially, the airline industry has been severely impacted. With international borders closed, and state borders unpredictably opening and closing for much of the COVID-19 pandemic, an airline company recognised large impairment expenses in 2020 and 2021. The airline reported an impairment expense in 2021 of $270 million and in 2020 of $1,456 million. For the reporting period ended 30 June 2021, the airline reported an underlying loss before tax of $1.823 billion and a statutory loss before tax of $2.35 billion. With the re-opening of international borders in November 2021 the airline industry has started to rebuild. Airlines are spending considerable amounts to retrain and re-certify pilots who have not flown for more than 90 days, and to service “mothballed” aircraft to make them ready and safe for flights.

Answer rating: 100% (QA)

Step 1 Here given the details of difficulties which are affected in the Airline Industry ... View the full answer