Question

Hi so i am working on a group project and need help with these two questions. I am doing Alaska Air Group Inc.

1. What are the company's depreciation methods? What is the range of estimated useful lives used for depreciating its assets? Does the company use the same depreciation methods for financial statements and tax returns? If not, please describe the methods used for tax purposes.
2. What are the company's footnote disclosures relating to impairment? Please also describe how to determine whether an impairment exists and how to calculate the impairment loss.

Answer 1

1) a) They are 4 depreciation methods followed by companies.

(I) Straight line method (II) Double Declining balance method (III) Units of production (IV) Sum of years Digits

b) What is the range of estimated useful life used for depreciating assets?

The IRS (internal Revue services) has developed useful life span for all the tangible assets that company may acquire for use in its business.

Life Span              Assets

   5  Years             Cars, taxis, buses, trucks, computers, office machines and equipment's

   7 Years             Office furniture and other fixtures

10 Years           Single purpose Agricultural assets

15 Years           Land and Business property

20 Years           Farm buildings   

c) Does the company use the same depreciation methods for financial statements and tax returns? What kind of depreciation used in tax purposes as per IRS

The accounting and IRS rules allow a company to use the 10-year straight-line assumption for the books and the 7-year accelerated method for the tax return. This leads some people to say the company is keeping two sets of books. Of course, the company must 1) maintain depreciation records for the book and financial statement depreciation based on the matching principle in accounting, and 2) maintain depreciation records for the tax return based on the IRS rules

2)

a) Company foot notes disclosures relating to impairment

ans: The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the investment below its cost is considered in determining whether the investments are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss is removed from the fair value reserve within equity and recognized in the income statement. Impairment losses recognized in the income statement on equity investments are not reversed through the income statement, until the equity investments are disposed of. Reconcile any changes in goodwill during the period, and any impairment losses.

b) Please also describe how to determine whether an impairment exists and how to calculate the impairment loss

Impairment is a permanent decline in the value of an asset. This situation exists when the cash flows or other benefits generated by an asset decline, as determined through a periodic assessment. If there is impairment, then the difference between the fair value of the asset and its carrying amount is written off.

Subtract the recoverable amount from the carrying cost to determine the amount you can list as a loss. This is your total impairment loss and the amount you can write off for the asset