Corporate Accounting

This document provides a comprehensive study on corporate accounting, including business and operating activities, finances and financial performance, sources of finance, and more. It also discusses the importance of CSR and sustainability in the context of Qantas Airways. The document offers valuable insights and solutions for assignments and essays on corporate accounting.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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1CORPORATE ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................2
Business and Operating Activities:............................................................................................2
Finances and Financial Performance:........................................................................................3
Sources of Finance.................................................................................................................3
Financial Performance:..........................................................................................................4
Event after reporting Date:.........................................................................................................4
Overview of changes in accounting policies:.............................................................................4
Assets – Property Plant Equipment and Intangibles:.................................................................5
Accounting Policies related to PPE:..........................................................................................6
Intangible assets reported by the company:...........................................................................6
Accounting policies relating to Intangible Assets:.....................................................................7
Impairment:................................................................................................................................8
Property Plant and Equipment:..............................................................................................8
Intangible Assets:...................................................................................................................8
CSR of Qantas Airways:............................................................................................................8
Importance of CSR and Sustainability:......................................................................................9
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

2CORPORATE ACCOUNTING
Introduction:
Qantas Airways Ltd is regarded as the premium airliner carrier of Australia and it is
regarded as the biggest airline company in terms of its size, worldwide flights and
destinations (Qantas Investors, 2019). The airline company is the viewed as the third oldest
airline company in the world following KLM and Avianca. The airline company has its base
in Sydney suburb of Mascot and its central hub is in Sydney Airport. The market survey
suggests that the Qantas Airways Ltd has the Australian market share of around 65% and
carries regularly 14.9% of the passengers both inside and outside of Australia.
The core business activities of Qantas Airways Ltd are transporting passengers by
using its two corresponding airline brands namely Qantas and Jetstar. The airline brand of
Qantas operates international, regional and domestic services and during the financial year of
2018 the company carried greater than 55 million passengers (Qantas Investors, 2019). The
company has wide range of subsidiaries business portfolio that ranges from the Qantas Fright
Enterprises. It also operates subsidiaries business that includes the other range of airlines and
businesses that are in the specialist market such as Q Catering.
Business and Operating Activities:
Australia’s aviation industry is anticipated to remain a positive factor in tourism with
higher forecast of stronger loads and yields on the Australian routes. In the last two decades,
there has been a growth in the international aviation capacity and Australia’s aviation
industry capacity has grown from 9.3 million inbound seats to 26.9 million seats for the year
2018 (Flower, 2018). It represents that Australian aviation industry is growing at an average
of 4% every year. The increase in the capacity is mainly due to rise in the capacity from the
New Zealand, Southeast Asia, Middle East and USA. From December 2018 the global
aviation volume of Australia has attained growth by 4.2% over the last twelve months.

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The airline industry can be considered very competitive and the profit margins that is
realised is very low. Virgin Australia is one of the well-branded competitor for Qantas
Airways under the budgeted market. Qantas Airways Ltd main aim is to make cost-effective
business by presenting new planes and catering services at reduced costs than the other
competing firms (Bushee et al., 2018). The competitive environment for Qantas Airways also
comprises of the Tigerair Airline that has adopted the similar lower cost model like Qantas
and Virgin Australia by introducing new planes and taking up the business functions in the
profitable routes at a cheaper price. Qantas faces the main obstacle in the market of the new
competitors that introduces new reduced prices for their services.
To make the competition intense airline companies such as Virgin Australia, Tigerair
and Impulse entered the Australian aviation market as the lower cost airline service provider.
Even though Qantas Airways has the strong brand popularity, Virgin Australia and Tigerair
Australia poses as a serious competitor for Qantas Airways by providing services at lower
cost. However, to cater the offers of competing firms Qantas Airways has launched a low-
cost service to counter Virgin Australia.
Finances and Financial Performance:
Sources of Finance
Qantas Airways uses external sources of finance to funds its business operations. The
company carry on to hold the substantial elasticity to manage its monetary situation,
approaches of funding and fleet strategy to make sure that it continues to answer to the
changes in the market circumstances and its profit earning set-up (Martínez‐Ferrero et al.,
2015). In order to remain inside the optimum capital structure, aiming the least level of
liquidity, assuring long-term obligations are achieved, the company maintains access to wide
range of added capital sources and handling maturity profiles (Qantas Investors, 2019).

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To maintain the access to the access to wide range of added funding sources together
with commercial paper and standby facilities, the company from time to seeks to purchase
and retire the unsettled debt with the help of cash purchase under the open market
transactions (Bertomeu & Magee, 2015). The external sources of finances of Qantas Airways
also includes both the secured and unsecured bank loans. The equity capital is also used by
Qantas Airways as the external source of finance to fund its business financial requirement.
Financial Performance:
Qantas Airways reported a record breaking underlying profit before tax of $1,604
million for the financial year ended 2018. It represents a rise of $203 million from 2016/17.
The statutory profit before tax for Qantas Airways stood $980 million which is $127 million
greater than the previous year. Qantas Airways three-year aspiring program of turning around
the business has been successful (Li & Yang, 2015). The creation of strong foundations and
constant transformation has enabled the company to deliver yet another financial
performance under the rising fuel cost environment. The company reported a strong return on
invested capital of 22% with all operating segments delivered the ROIC of higher than the
WACC (Adams, 2015). Qantas Airways also reported a strong operating cash flow of $3.4
billion.
Event after reporting Date:
The dividends and other shareholder’s distributions of Qantas Airways has not
originated during the interval of 30 June 2018 and the date of this report or any other event
that may create a material impact on the consolidated financial statement following the
reporting date as on 30 June 2015 (Qantas Investors, 2019).
Overview of changes in accounting policies:
Area Description of Change

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Allocation of Revenue Under the AASB 15 Qantas Airways will
change the allocation of revenues from
residual method to proportional basis.
Net passenger revenue The revenue related to ancillary services
will be deferred from the time of booking
till uplift so that an alignment with revenue
recognition is created with related
passenger.
Assets – Property Plant Equipment and Intangibles:
The carrying amount of each class of property, plant and equipment at the reporting
date of Qantas Airways is given below;
PPE ($) At Cost Acc Dep and
Impairment
Net book value
Freehold land 49 0 49
Buildings 295 -216 79
Leasehold
improvements
1,392 -990 402
Plant and Equipment 1,511 -1,099 412
Aircraft and Engines 22,713 -11,964 10,749
Aircraft spare parts 909 -414 495
Aircraft deposits 665 0 665

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Accounting Policies related to PPE:
Items relating to the PPE are stated by Qantas Airways based on their cost after
subtracting the depreciation expenses and impairment loss (Qantas Investors, 2019). Qantas
Airways initially recognizes the items of PPE based on the recorded cost which is the fair
value of the consideration along with any related costs that is straightaway attributable to the
acquirement. The cost of assets that are acquired includes the initial estimations at the time of
setting up and the cost of dismantling (Dumay, 2016). It also includes the removal of the item
and restoring it to the site where they are located and changes in the measurement of current
liabilities that are identified at their cost leading from the changes in the timing and outflow
of resources that is needed for settling the obligations or arising from the alterations in the
rate of discount.
The winding down of discount is considered as finance expenditure in the income
statement (Guay & Verrecchia, 2017). The costs might comprise of the transfers from the
hedge services relating to any gain or loss from qualifying cash flow hedges of the foreign
currency purchases of the PPE. The cost of borrowing that are related with the purchase,
construction or production of the qualifying assets are identified as the portion of cost of
assets to which they are related.
Intangible assets reported by the company:
Intangible assets Net Value Book ($)
Goodwill 207
Airport landing slots 35
Software 757
Brand names and trademarks 26
Customer contracts / relationships 1
Contract intangible assets 87

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Total Intangible Assets 1,113
Accounting policies relating to Intangible Assets:
The accounting policies associated to the intangible assets
Goodwill: The company identifies the goodwill at cost after deducting the accumulated
impairment losses (Holland, 2015). In relation to the investment that are accounted under the
equity method, the carrying value of the goodwill is included into the carrying value of
investment.
Airport landing slots: The company identifies the airport landing slots based on the cost
after deducting accumulated impairment loss.
Software: The software is identified based on their cost following the accumulated
amortisation and impairment losses (Qantas Investors, 2019).
Brand names and trademarks: The company carries the brand names and the trade mark at
the cost after deducting the accumulated impairment losses.
Customer contracts/relationships: The customer contracts/relationships are carried by
Qantas at their fair value on the date of purchase after deducting the accumulated
amortisation and impairment losses.
Contract Intangible assets: The contract intangible assets are recognized at their cost after
deducting the amortisation. Amortisation beings from the date when the assets are ready for
use.

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Impairment:
Qantas Airways has recognized the impairment losses for buildings, leaseholds
improvements, plant and equipment, aircraft and engines and aircraft spare parts (Qantas
Investors, 2019). The values of impairment losses are recognized below;
Property Plant and Equipment:
PPE ($) Impairment
Buildings 216
Leasehold
improvements
990
Plant and Equipment 1,099
Aircraft and Engines 11,964
Aircraft spare parts 414
Intangible Assets:
The intangible assets that are recognized for impairment losses is the software and
customer contracts/relationships.
Assets Impairment Losses ($)
Software 924
Customer contracts/relationships 3
CSR of Qantas Airways:
Qantas Airways operates the integrated management system that aims to satisfy the
health, safety and environmental legislative (Qantas, 2019). The key initiative that has been

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taken by the Qantas Airways towards promoting sustainability and responsibility is given
below;
a. The company has adopted the strategy of attaining fuel efficiency through
modernisation of fleets and operational improvements.
b. The company has also adopted the strategy of carbon offsets by using biofuels under
the ICAO Corsia scheme.
c. Key initiative of Qantas Airways includes the waste, water and energy improvements
by making investment in new technologies.
d. To meet the sustainability trends the company is looking to develop green products
that attributes sustainable goods and services.
Importance of CSR and Sustainability:
In the growing modern world CSR and sustainability is important for business
because it is an important tool that helps in creating long-term organizational value (Du
Plessis et al., 2018). CSR and Sustainability reporting helps a business in effective economic,
social and environmental risk management. Sustainability helps in promoting awareness that
every company is surrounded by stakeholders (Tricker, 2015). Furthermore, sustainability
acts as the response to the challenges of the modern world that transforms the possible threats
and risks into a development opportunity for the organization from the public and private
sectors. While the CSR policies must be measured as an essential and attached component for
the complete goods and service offering.

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Conclusion:
Conclusively, Qantas Airways continues to be the leading company for Australia’s
airline industry. However, if Qantas wants to be remain at the top of the industry it should try
to review its operation and bring in more competitive strategies that would help in improving
the weaker business areas. The company is however recommended to use more of its Jetstar
branch to adopt the competitive strategies that are different from the services offered by its
competitors.

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References:
Adams, C. A. (2015). The international integrated reporting council: a call to action. Critical
Perspectives on Accounting, 27, 23-28.
Bertomeu, J., & Magee, R. P. (2015). Mandatory disclosure and asymmetry in financial
reporting. Journal of Accounting and Economics, 59(2-3), 284-299.
Bushee, B. J., Goodman, T. H., & Sunder, S. V. (2018). Financial Reporting Quality,
Investment Horizon, and Institutional Investor Trading Strategies. The Accounting
Review.
Consumer insights on sustainability | Qantas. (2019). Retrieved from
https://www.qantas.com/in/en/qantas-group/acting-responsibly/our-planet/partnering-
for-sustainability.html
Davies, A. (2016). Best practice in corporate governance: Building reputation and sustainable
success. Routledge.
Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of contemporary corporate
governance. Cambridge University Press.
Dumay, J. (2016). A critical reflection on the future of intellectual capital: from reporting to
disclosure. Journal of Intellectual capital, 17(1), 168-184.
Flower, J. (2018). Global financial reporting. Macmillan International Higher Education.
Guay, W. R., & Verrecchia, R. E. (2017). Conservative disclosure.
Holland, J. (2015). Public and Private Disclosure and the Role of Financial Reporting. Wiley
Encyclopedia of Management, 1-6.

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Li, X., & Yang, H. I. (2015). Mandatory financial reporting and voluntary disclosure: The
effect of mandatory IFRS adoption on management forecasts. The Accounting
Review, 91(3), 933-953.
Martínez‐Ferrero, J., Garcia‐Sanchez, I. M., & Cuadrado‐Ballesteros, B. (2015). Effect of
financial reporting quality on sustainability information disclosure. Corporate Social
Responsibility and Environmental Management, 22(1), 45-64.
Qantas Investors | About the Qantas Group. (2019). Retrieved from
https://investor.qantas.com/home/?page=about-the-qantas-group
Tricker, B. (2015). Corporate governance: Principles, policies, and practices. Oxford
University Press, USA.