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Fleet Planning Management - Essay Example
Pages 2 (502 words)
Event Issue: A successful aircraft purchase decision includes market timing, purchase price, financing, operational performance and economics. The proper mixture is however, key. Most airlines today are now relying on leasing or third party financing to acquire aircraft…
Such classification will lead to a proper accounting procedure of the items. For finance leases, assets are recognized in the balance sheet and rose for operating
Leases are simply expensed. Such a distinction dictates how the risks and benefits are substantially transferred to the leases. Such benefits and risks are substantially transferred to the lessee in finance leases but not operating leases.
Conclusion: In the disclosure requirements a distinction is to be made as to finance or operating lease. For a finance lease the carrying amount of the asset is disclosed if the company owns it. The company owns the aircrafts substantially. Such aircrafts are their tights subject to certain provisions. For operating leases, the lease payments are recognized as expenses for the period and no asset is recognized.