Case Study 2: Qantas Airways Ltd and Singapore Airlines Ltd 
This comparative study of accounting policies adopted by two international airlines for the depreciation of aircraft, spares and spare engines provides an insight into the differences in accounting policy that may emerge, even when accounting practice in the jurisdictions involved is regulated. 
Key concepts involved are as follows: 
• Non-current assets 
• Depreciable amount 
• Depreciation 
• Useful life 
• Comparability of results 
• Financial statement analysis 
Qantas Airways Ltd (Qantas) and Singapore Airlines Ltd (Singapore) both operate in the international aviation industry. The former is Australia's largest airline, having been formed in 1920 in outback Queensland as the Queensland and Northern Territory Aerial Service Ltd (now Qantas). Singapore was formed in 1972, although its origins date back to 1947, and is based in south-east Asia, operating from the city-state of Singapore at the Changi Airport. 
Both companies operate diverse airline fleet. Aircraft, spares and spare engines collectively constitute a major asset of such corporations as is demonstrated by reference to the 2011 statements of financial position of these two companies. In the case of Qantas, this non-current asset, shown as 'Property, Plant and Equipment' at the stated carrying value of AUD$9753.7 million as at 30 June 2011. For Singapore, this 'fixed' asset category, disclosed as 'Aircraft, spares and spare engines' at a carrying value of S$12464.5 million, constituted 62.4 per cent of total group assets as at 31 March 2011 of S$19990 million. Accordingly, the accounting policies adopted in depreciating such assets over their useful lives assume importance in assessing the financial performance and position of airline operators. 
In the case of Qantas, the 'Depreciation and amortisation' policy for aircraft, spares and spare engines was disclosed in Note 1(n) for the 'Notes to the financial statements' for the year ending 30 June 2011. The relevant portion of this note is reproduced below: 
Depreciation (Qantas) 
Depreciation is provided on a straight-line basis on all items of property, plant and equipment except for freehold and leasehold land. The depreciation rates of owned assets are calculated so as to allocate the costs or valuation of an asset, less any estimated residual value, over the asset's estimated useful life to the Qantas Group. Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. The costs of improvements to assets are depreciated over the remaining useful life of the asset or the estimated life of the improvement whichever is shorter. Assets under finance lease are amortised over the term of the relevant lease or, where it is likely the Qantas Group will obtain ownership of the asset, the life of the asset. 

The principal asset depreciation and amortisation periods and estimated residual value percentages are: 

Years Residual Value % 
Jet Aircraft and engines 20 0-20 
Non-jet Aircraft and engines 10-20 0-20 
Aircraft spare parts 15-20 0-20 

These rates are in line with those for the previous year, with the exception of the residual value assumption on wide-bodied aircraft, which was revised from 25% to 20%. 

Depreciation rates and amortisation rates and residual values are reviewed annually and reassessed having regard to commercial and technological developments and the estimated useful life of assets to the Qantas Group. 

On the other hand Singapore reported its policy to the 'Depreciation of fixed assets' at Note 2(g), entitled 'Accounting policies'. The portion of this note pertaining to aircraft, spares and spare engines is reproduced hereunder: 

Depreciation of Fixed Assets (Singapore) 
Fixed assets are depreciated on a straight-line basis at rates that are calculated to depreciate their cost to their estimated residual values at the end of their operational lives. Operational lives and residual values are reviewed annually in light of experience and changing circumstances. 

Fully depreciated assets are retained in the financial statements until they are no longer in use. No depreciation is charged after assets are depreciated to their residual values. 








Aircraft Fleet 
The following table gives information relating to Singapore's calculation of useful life and residual values of its aircraft fleet and associated spare parts. 

Years Residual Value % 
Passenger Jet Aircraft (New) 15 10 
Freighter Aircraft (New) 15 20 


Please Note: 
AUD = Australian Dollars 
S = Singapore Dollars 

Qantas Airways Ltd 2011 Financial Report 
http://www.qantas.com.au/infodetail/about/investors/2011AnnualReport.pdf 


Singapore Airline Ltd 2011 Financial Report 
http://www.singaporeair.com/pdf/Investor-Relations/Annual-Report/annualreport1011.pdf