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Author Topic: [ok] Profit vs. Cash flow, Accounting, Income statement  (Read 19814 times)

Offline schro

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #120 on: January 03, 2014, 01:15:43 PM »
The trouble with aircraft is that from an accounting perspective, marking to market is not how aircraft are accounted for, so any marking should be for informational purposes only.

However, I was thinking that the appropriate accounting treatment for fuel hedges is to mark them to market on a periodic basis and recognize the gain or loss at that time rather than over the life of the contract. It might be somewhat pointless with our maximum hedge length being a year though. The other thing that would prevent accounting for it correctly is that our fuel hedges are not for explicit quantities of fuel.

Offline JumboShrimp

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #121 on: January 03, 2014, 03:55:35 PM »
The trouble with aircraft is that from an accounting perspective, marking to market is not how aircraft are accounted for, so any marking should be for informational purposes only.

For AWS, it would be for informational purposes only.  But if an investor were to invest in an airline, the investor would be interested in market value of the assets (as one of the variables to consider).

However, I was thinking that the appropriate accounting treatment for fuel hedges is to mark them to market on a periodic basis and recognize the gain or loss at that time rather than over the life of the contract. It might be somewhat pointless with our maximum hedge length being a year though. The other thing that would prevent accounting for it correctly is that our fuel hedges are not for explicit quantities of fuel.

Another thing to consider (for hedges, not for fuel contract) is to have full fuel price in operational expenses (+/- net of discount and contract fees) and have hedge as a financial instrument that is going to generate gains or losses.  Not as a balance sheet item (that would be too complicated) just as a gain or loss.  This would help airlines see where they stand operationally without the hedge.

Offline Sami

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #122 on: January 04, 2014, 02:54:25 PM »
Updates:
- cashflow and income statements include now a separate base airport filter/selector. (For balance sheet this isn't feasible)

- formatting of balance sheet should be done now, all relevant items are listed. It will start to collect data soon (still incomplete)..


edit: Balance sheet is now collecting data. It will update every day at 12.00 and 24.00.

It is still missing the prepayments on a/c orders but otherwise should be complete. (and also have to think a bit on the transition of old airlines to the new system)
« Last Edit: January 04, 2014, 07:08:28 PM by sami »

Offline schro

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #123 on: January 05, 2014, 12:54:30 PM »
Equity is not a liability ;-)

Assets = liabilities + equity

Offline LemonButt

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #124 on: January 05, 2014, 03:51:01 PM »
Equity is not a liability ;-)

Assets = liabilities + equity


I think sami meant to put is shareholder's equity, which is a liability.

Offline schro

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #125 on: January 05, 2014, 04:02:25 PM »
I think sami meant to put is shareholder's equity, which is a liability.

That's still not a liability because the company is not obligated to repay it.

Offline LemonButt

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #126 on: January 05, 2014, 04:13:08 PM »
That's still not a liability because the company is not obligated to repay it.

I think we're saying the same thing.  Equity lines up on the liabilities side of the sheet on a balance sheet and you are right liabilities + equity = assets.  Looking at the screenshot again, he just needs to change "total liabilities" to "total liabilities and shareholders' equity", which I think is what you were saying previously and I just misinterpreted it.

Offline schro

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #127 on: January 05, 2014, 04:21:30 PM »
I think we're saying the same thing.  Equity lines up on the liabilities side of the sheet on a balance sheet and you are right liabilities + equity = assets.  Looking at the screenshot again, he just needs to change "total liabilities" to "total liabilities and shareholders' equity", which I think is what you were saying previously and I just misinterpreted it.

Ding ding.

Offline LemonButt

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #128 on: January 07, 2014, 07:27:30 PM »
Another item that will need to be changed when this goes live is the profit margin statistic to reflect operating/gross margins instead of net: http://www.airwaysim.com/game/Info/Stats/ProfitMargin/

Offline Sami

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #129 on: January 08, 2014, 11:09:28 PM »
Balance sheet (beta) has been updated, the Q-M-Y views work now also properly.

Also data on prepaid aircraft purchases/leases is added (data collected from present point, no history  .. shown under 'Deposits on flight equipment purchases'), but used a/c prepayment data is missing still.


Please actively monitor this now to see if anything is wrong ... the mechanics of this page are a bit different from cashflow/incomesheet so there may be errors. (however any errors do not really affect anything as balance sheet is simply a collection of values from various data sources)

Address is still www.airwaysim.com/game/Office/Balance in case you missed it.


Also any thoughts on how to replace the airline info page's "company value" field?  I would propose that we remove it alltogether, and add instead a new "financial information" tab where anyone can view the two latest balance/cashflow/income statements (previous full year, and one year before that). Format would be the same as for these internal airline pages, but with a bit less expandable information etc (only the main lines etc).
« Last Edit: January 08, 2014, 11:16:53 PM by sami »

Offline Ryno

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #130 on: January 09, 2014, 12:59:35 AM »

Also any thoughts on how to replace the airline info page's "company value" field?  I would propose that we remove it alltogether, and add instead a new "financial information" tab where anyone can view the two latest balance/cashflow/income statements (previous full year, and one year before that). Format would be the same as for these internal airline pages, but with a bit less expandable information etc (only the main lines etc).

i think that would be good. it would allow smaller airlines to see how airlines that are much larger a running their cash and learn from it.

ryno

Offline LemonButt

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #131 on: January 09, 2014, 03:48:58 PM »
Assets - Liabilities = Company Value

or using the current balance sheet, Company Value = Shareholders' Equity.

BD

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #132 on: January 09, 2014, 04:27:48 PM »
Also any thoughts on how to replace the airline info page's "company value" field?  I would propose that we remove it alltogether, and add instead a new "financial information" tab where anyone can view the two latest balance/cashflow/income statements (previous full year, and one year before that). Format would be the same as for these internal airline pages, but with a bit less expandable information etc (only the main lines etc).
That would be similar to the information available IRL on publicly held companies. Current, and previous two full years should be enough to make a fair assessment.  Would be sufficient to have one tab with all three reports on one page.  Might also consider doing the same for our regular weekly financial reports (vs three separate url pages), IMHO.

Offline dmoose42

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #133 on: January 10, 2014, 12:15:51 AM »
On a related note, because CV now includes slot costs, an airline that is struggling will likely have a better credit rating than it deserves because even though it is losing money, because of previously paid slot acquisition fees, the bank thinks the airline is worth more than it really is.  When the bank is evaluating an airline, it should exclude the value of the slots in the consideration.

Offline Sami

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #134 on: January 10, 2014, 05:46:29 PM »
The manual page has been updated (thanks a million to dmoose42!), together with a preliminary announcement of the update.

BD

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #135 on: January 10, 2014, 07:05:33 PM »
Quote from: Manual - Transition Section
Given that slots are now tracked as assets, aircraft, cash, and slots owned are counted as your assets. Slots are still not tradable and you can only lose these assets if you close the route or lose the slot. They are recorded as an asset at the purchase cost and this value will not appreciate or depreciate over time (assuming the route is continuously flown). If you decide to give back the slot, the original cost of the slot will be expensed at that point, reducing income in that period.
Are slots expensed any time they go back to the "Authority", or only when you actively choose to give them back?  I suspect any time, but want to make sure.

BD

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #136 on: January 10, 2014, 07:27:59 PM »
Quote from: Manual - Liabilities and Equity Detail
Shareholder’s Equity (retained earnings): The current value of your airline (similar to the Company Value metric historically).
Might be useful to those not familiar with the accounting concept to point out that this is simply the residual value...the amount left over when the value of all liabilities are subtracted from the value of all the assets.

Well done on the manual!


abezerra

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #137 on: January 11, 2014, 05:23:49 AM »
Does any accounting specialist know if, in the airline industry, leasing contracts are recognized as fixed assets/financial liabilities under IAS17? (International Accounting Standard)

I don't want to complicate things, I am just curious to know.


Offline Sami

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #138 on: January 11, 2014, 12:34:28 PM »
D checks are known as "long term maintenance" under cash flow and balance sheets. For your owned planes of course .. for leased planes D checks are written off as direct expenses to keep it simple, as you don't have any depreciation there (and maintenance depreciation is technically tied to aircraft depreciation).

Here we have a plane that was bought for $570k, and has had two ~$600k D checks made. Book value of the plane is then that 570k+1.2mil (- depreciation).


...also, there will be a public 'beta' game with the new accounting features enabled, some time next week perhaps.
« Last Edit: January 11, 2014, 12:38:39 PM by sami »

abezerra

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Re: Profit vs. Cash flow, Accounting, Income statement
« Reply #139 on: January 11, 2014, 07:22:17 PM »
Sami, in spite of my doubts on the option of considering slots as an asset, I think you have done a great job on the balance sheet: congrats!

However, is there still room for discussion on the cashflow statement?

Cashflow from financing activities is related with the B/S financing structure of the airline (loans withdrawals and repayments), whereas cashflow from investments is related with transactions on B/S fixed assets (aircraft purchase/sale, + slot fees as per your accounting option).
I do agree with other posts suggesting that aircraft leasing income should not be classified as investing activity, and in particular a "capital gain", but rather as an operating cash in the same way leasing expenses are.
By the way, in the manual, the definition of cashflow from investing activities reads: "Net investing cash flow is designed to show uses of cash related to transactions that impact the capital stock of an airline". It shouldn't read "Fixed Assets" instead of capital stock? What do you mean by "capital stock"? This term is commonly used for the issuing of shares.


 

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