Assigned US Airline: United Airlines – Foreign Airline: Air Canada

Please answer all of the following questions of the financial statements of the above airlines.

1. What amounts do your foreign and U.S. airline report for the following items for the last fiscal year?

a. Long-term assets

b. Property, plant and equipment

c. Intangible assets

d. Trading financial assets or Investments accounted for at fair value through profit and loss

e. Available-for-sale financial assets

f. Held-for-maturity financial assets

g. Investments accounted for using the equity method

h. Derivative financial instruments

i. Deferred tax assets

j. Interest Revenue

k. Dividend Revenue

B2. How does the foreign airline report/value its property, plant, and equipment? Does it have a policy on revaluing property, plant, and equipment? Suppose it decided to revalue its flight equipment on the last day of the fiscal year and that the fair value of the equipment on that date was 12 billion. Prepare the journal entry to record the revaluation assuming that the journal entry to record annual depreciation had already been recorded. (Hint: you may need to locate the original cost and accumulated depreciation of the equipment at the end of the year in the appropriate disclosure note.)

B3. Describe any differences between IFRS and U.S. GAAP in the calculation of depreciation. How does each airline calculate depreciation expense? What is the amount of depreciation expense for each?

B4. How does the foreign airline report/value its intangible assets? Does the company have a policy of revaluing intangible assets? What method does the foreign airline use to amortize the cost of IT/computer software development costs? How does this approach differ from U.S. GAAP?

a. Examine the income statements for both airlines. For each, what is the total amount of amortization of software development costs?

b. For each, is there amortization for other items? If so, for what and how much?

B5. Does the foreign airline report any research and development expenditures? If so, its approach to accounting for research and development would be significantly different from U.S. GAAP. Describe the differences between IFRS and U.S. GAAP in accounting for research and development expenditures.

What is the total amount of research and development expenditures for each airline?

B6. How does the airline account for investments? Is that approach consistent with U.S. GAAP?

a. As of the balance sheet date, how much of the balances are classified as current and how much as noncurrent?

b. How much of the fair value of those investments is accounted for using level 1, level 2, and level 3 inputs of the fair value hierarchy