Accounting for Managers: Depreciation, Methods, and Reporting Requirements

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
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1ACCOUNTING FOR MANAGERS
Table of Contents
Part (A):...........................................................................................................................................2
1. Concept of depreciation:..........................................................................................................2
2. Outlining the current reporting requirements:.........................................................................2
Part (B): Two common depreciation methods commonly used:.....................................................2
Part (C):...........................................................................................................................................3
1. Brief overview of Qantas Airways Limited and Virgin Australia Limited:............................3
2. Areas and ways of recording depreciation and impairment in their annual reports:...............4
Part (D): Effect of the differing depreciation rates on the profit of Virgin Ltd and Qantas Airways
Ltd:...................................................................................................................................................4
Part (E): Reasons that the choice of useful lives differ across the organisations:...........................5
Part (F): Discretion to choose the depreciation method and useful lives applicable to various
asset classes for the organisations:..................................................................................................6
Part (G): Factors affecting the useful lives of assets like aircrafts:.................................................6
Part (H): Impairment of assets and current reporting requirements in the context of the two
chosen organisations:.......................................................................................................................7
References:......................................................................................................................................8

2ACCOUNTING FOR MANAGERS
Part (A):
1. Concept of depreciation:
As commented by Bragg (2017), depreciation could be defined as the systematic
distribution of the cost of an asset over its useful life in order to match the systematic allocation
with the revenue generated from the asset. Few examples include building, equipment, furniture
along with plant and machinery, as these are depreciable assets. However, the only exception is
land, since its value appreciates with the passage of time.
2. Outlining the current reporting requirements:
The current reporting of depreciation is dependent on two principles of accounting, which
are described briefly as follows:
Cost principle:
According to this principle, the amount of depreciation disclosed in the income statement
and the amount of asset disclosed in the balance sheet statement needs to be dependent on the
original asset cost.
Matching principle:
According to this principle, the cost of an asset could be distributed to depreciation over
the asset life. As a result, the asset cost is segregated with some cost disclosed in the income
statements issued at the time of asset life. By distributing a part of the cost of the asset to the
income statement, a part of the asset cost with each year where the asset is used is matched
(Cooper 2017).
Part (B): Two common depreciation methods commonly used:
The two prevalent depreciation methods used in accounting mainly comprise of the
following:
Straight-line depreciation method: