In fiscal 2020, Lufthansa reported impairment losses on non-current assets of 1,828m (previous year: E84m). According...

 

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In fiscal 2020, Lufthansa reported impairment losses on non-current assets of €1,828m (previous year: E84m). According to the annual report, "The increase comes mainly from impairment losses on several mostly four- engine aircraft models which are being permanently retired or transferred to long-term parking mode." Required: (a) Which section of the cash flow statement includes the impairment loss in the computation? Is it added to subtracted? Briefly explain why. (5 marks) (b) Supposed that, instead of transferring the aircraft (eight Airbuses A380 and ten Airbuses A340-600) to a long-term parking lot, the management were to sell them, taking a loss on disposal (the 2020 market for used aircraft was severely depressed). How would the loss on disposal and the proceeds from sale be reported in the financial statements? (5 marks) (c) As an investor, how would you use the information about the impairment loss in 2020 when you make a forecast about Lufthansa's operations in the near future? Briefly explain. (5 marks) In fiscal 2020, Lufthansa reported impairment losses on non-current assets of €1,828m (previous year: E84m). According to the annual report, "The increase comes mainly from impairment losses on several mostly four- engine aircraft models which are being permanently retired or transferred to long-term parking mode." Required: (a) Which section of the cash flow statement includes the impairment loss in the computation? Is it added to subtracted? Briefly explain why. (5 marks) (b) Supposed that, instead of transferring the aircraft (eight Airbuses A380 and ten Airbuses A340-600) to a long-term parking lot, the management were to sell them, taking a loss on disposal (the 2020 market for used aircraft was severely depressed). How would the loss on disposal and the proceeds from sale be reported in the financial statements? (5 marks) (c) As an investor, how would you use the information about the impairment loss in 2020 when you make a forecast about Lufthansa's operations in the near future? Briefly explain. (5 marks)

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Solution 03 Which section of imparament loss in the Couputatisn the cash flow stateme... View the full answer