Depreciation Policy of Air New Zealand as per AASB 116

Corporate accounting

Question 3
In Our case we are going to look at Air New Zealand which is an airline listed in the Australian
stock exchange. According to AASB 116 which is comparable to IAS 16 items that have a
significant figure compared to the total cost of item of equity shall be recognized separately for
depreciation even if that item is under finance lease. Like in an aircraft the airframes and the
engine are recognized separately in the case of Air New Zealand the following items are
recognized for depreciation, Airframes, Engines Engine overhauls, Aircraft specific plant and
equipment (that is including simulators and spares, buildings and lastly non-aircraft specific
leasehold improvements, plant equipment furniture and vehicles.
If items useful life has almost the same character they can be grouped together for the purpose of
depreciation. Also, even if an item may not have a significant cost on the total cost it can be
charged for depreciation in a way that faithfully reflect its usage pattern or its useful life
The amount that is depreciated it shall be an allowable expense in the income statement unless it
is included in the carrying amount of another asset this is a case where the item is used to
produce other asset items so depreciation charges consist of the item production cost for
example in a manufacture of item the cost of depreciation can be included when conversion of
the item of stock is being done, in the case of Air new Zealand the items are recognized in the
income statement. (aasb, 2018)
The amount to be depreciated shall be allocated in a systematic basis over the useful life of the
item and the residual value reviewed at the end of each financial year. Depreciation shall be
recognized even if the fair value exceeds the carrying amount and as long as the residual amount
does not exceed the carrying amount.
Depreciation of an item starts when you start using it and it will end when an item is maybe
declared for disposal or for sale. So, as long as an item is held even if it is idle or is not in the
active, it will still be depreciated. But when applying the method of unit of production to
depreciate an item the depreciation can be zero if n production done on the item.