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Author Topic: [-] Income Statement Inconsistency  (Read 339 times)

Offline Alien

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  • Posts: 221
[-] Income Statement Inconsistency
« on: August 17, 2010, 11:25:50 AM »
First, I have to say, the income statement, as it is at the moment is not really useful. There are expenses, which are no costs included as costs and the total is not showing any number as it could be used for taxation, income or comparison.

Exampel 1: If I take a loan, it does not show as income, but if I repay a loan, it shows the total amount as loan cost. That means, If You have 10 million of old loans at a high interest rate and repay (reorganise) them with a new loan at a lower interest rate, You have lost 10 million. This is just inconsistent.

Exampel 2: If You lease an aircraft, You have to pay a downpayment of 4 lease rates. This money is shown as expense, which is correct, as You will not get that money back, when You terminate the lease contract. If You buy an aircraft, the money is also shown as expense, although it is not. The payment for the aircraft is an investment. Only the depreciation for the aircraft should be deducted as an expense. In reality, You don't reduce Your income by buying investments. You will still have to pay incometax for that income. But for the following years, You can reduce Your income by the depreciation.

Exampel 3: When selling an aircraft, it is not shown at all, that You have received money. This would be correct, but only if buying an aircraft would not show up as well. Buying and selling investments should be costneutral. Only the difference between the actual aircraft value and the saleprice should be shown as income or cost.

If You ask, how to calculate the depreciation, there are two ways: Either You take the actual value of the aircraft and compare it with the buying price, the difference should be the depreciation.
The other possibility would be to determine the intended usage periode (which could be fixed at 7 or 10 years, or which could be varied between 5 and 15 years at the moment of the purchase by the airline), where You reduce the bookvalue of the aircraft every year by the corresponding percentage (for 10 years it would be 10% per year). Usage periode for new aircraft should be longer than for used aircraft.

That this system as it is does not work just shows from the just ended game (Beginners world #8), where my airline (Flying Orang Utans)was worth more than 5.000.000.000, although I have hardly had no income and hardly ever payed tax.

Best greatings

Alien
« Last Edit: January 04, 2011, 06:18:03 PM by sami »

Offline swiftus27

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  • Posts: 4395
Re: Income Statement Inconsistency
« Reply #1 on: August 17, 2010, 01:02:53 PM »
here we go again.




 

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