Exchange Rate Risk Management

Abstract:

Depreciation is reduction of fixed assets by gradually loss（both tangible and intangible loss）due to their usage and then transfer to the product cost or expense of commodity circulation(Mike Sylvester 2011). The process of depreciation is also a process of cost allocation, so it is not only to cover the investment and make the company have the ability to reset the fixed assets in the future, but also allocate the cost of investment into different benefit period and realize the correct ratio between revenues and expenses. Although there are many kinds of depreciation, all the objective of them is to make profit for the company.

This report mainly discusses and compares the different accounting policies in depreciation between two airlines companies, Aviator Airways Ltd and Eagle Airlines limited. Both two companies operate a diverse airline fleet in the international aviation industry. In the first part, there will have some compare between two depreciation policies and also include some contrast. After that, comments will be made out as results. Then, the report will work out the expense of depreciation for the year of 2012 for both companies. After that, annual report the company will be reviewed and talk about how it accord with AABC standards. Finally, based on the above analysis, the depreciation policy’s on the financial statements and ratios of the company under aviation industry will be discussed.

1. Comparison and contrast

There are both similarities and differences between two companies’ depreciation accounting policies and those things will be introduced in the following statements.

2.1 Similarities

* Straight-line method

As the simplest and most commonly method, it is calculated by taking the purchase or acquisition price of the asset. The computing method is use the net asset value and divide it by the number of periods (usually years) of useful life (Obaidullah Jan n.d.). The formula is shown at...