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Author Topic: [-] Book Value  (Read 1304 times)

Offline dmoose42

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Re: [-] Book Value
« Reply #20 on: January 02, 2014, 07:02:03 PM »
nope... sell it to an alliance member with the same "problem" and he sells me his airplane (for the same price, but too high) ... both get a higher CV, thus a higher depreciation, thus pay less taxes over time and... I don't know what other advantages they could get from the higher CV ... take out more loan maybe? ... maybe get a bether rating? ... don't know how that works


You will pay less in taxes over time that is true, but you have lost that money.  If you try and sell now (without colluding with a competitor) you will receive 10m less (realizing the loss) assuming that the original price was market price.  If you fly the plane until it fully depreciates, you will still get the same scrap value either way, so that 10m will have disappeared (although you will be able to deduct it on your taxes).

You're right that you may be able to get a small advantage doing this (though lower taxable income, but it's kind of annoying and the benefit is minimal so i think the risk is low.  If I have 300 or 500 planes, do i really want to do this the whole time?

Offline meiru

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Re: [-] Book Value
« Reply #21 on: January 02, 2014, 07:46:42 PM »
You will pay less in taxes over time that is true, but you have lost that money.

If I have 300 or 500 planes, do i really want to do this the whole time?

1. I have lost only virtual money -> AC1 costs 10M, AC2 costs 10M -> A sells AC1 to B for 13M, B sells AC2 to A for 13M -> result? 0, but they both have 3M more CV ... losing this over time is not really losing money

2. Why all the time? It's enough if you do it, when you want to have a higher CV ... and not for all... it's enough to do it for some... as I learned, those aircrafts are sitting in the desert, because it's an taxfree way to store assets... now, if those assets lose the value, you can restore it using my method... and over time, the aircrafts get older and older, but the book value will always be kept at the same high level

Offline dmoose42

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Re: [-] Book Value
« Reply #22 on: January 02, 2014, 07:55:22 PM »
1.  If salvage value is $1million, then you will get $1 million back in both cases.  In situation 1, you have lost 9 million during the course of using the plane, in situation 2, you have lost 12 million.  Sorry to say, but that is real money.

2. Book value will decline constantly due to depreciation so i suppose you could keep up this charade for a while, but as the plane approaches 25 years old, your depreciation amount will just be higher and higher....so it will be a short and temporary gain unless you are repeatedly doing this transaction with new planes.  Which, you can do if you want to, but will take a decent amount of effort and annoyance to do, with relatively small benefit (so increased your CV by 10%, big deal).

On a side note, Sami could easily kill this by booking new aircraft at lower of cost or market.  If the insurance broker/bank believes your aircraft is worth 10m, but you pay 8m for it.  The book value will be 8m.  If you pay 13m for it, your aircraft would be recorded at 10m.  He could then record the 3m as goodwill impairment and disallow a tax deduction against that loss.  The data is already there.  Happy?

Offline meiru

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Re: [-] Book Value
« Reply #23 on: January 02, 2014, 08:11:27 PM »
1.  If salvage value is $1million, then you will get $1 million back in both cases.  In situation 1, you have lost 9 million during the course of using the plane, in situation 2, you have lost 12 million.  Sorry to say, but that is real money.

?? ... no, I made 13M out of 10M (on the paper) and then I lose 9 or 12M of it (also on the paper, because the aircraft is still around) ... I don't have to pay for the depreciation ... it's only happening so -> no real money, only on the paper (of course, of the 13M the first 10M are real money, but the 3M are not)

On a side note, Sami could easily kill this by booking new aircraft at lower of cost or market.  If the insurance broker/bank believes your aircraft is worth 10m, but you pay 8m for it.  The book value will be 8m.  If you pay 13m for it, your aircraft would be recorded at 10m.  He could then record the 3m as goodwill impairment and disallow a tax deduction against that loss.  The data is already there.  Happy?

That's what I'm talking about all the time... you cannot take the selling value as book value... (without additional rules)

Online Sami

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Re: [-] Book Value
« Reply #24 on: January 02, 2014, 09:27:20 PM »
Feature hasn't been even introduced yet and now the first one tries to start bending it already .. sad. And people moan about game limitations...

For purposes of accounting the original cost is always the basis of the book value, simple.

Offline dmoose42

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Re: [-] Book Value
« Reply #25 on: January 02, 2014, 09:49:44 PM »
Meiru:

When you sold the plane above cost (13 vs. 10) you have to pay tax on the gain on sale so it is 'real money'...basically you are just prepaying your taxes (great idea!) and then recovering it through a higher depreciation expense (which offsets future earnings).  You do get to temporarily report a higher CV at a rate of (sale price-cost)*(1-tax rate), but at the cost of real money out the door at inception of this scheme and lower reported profitability throughout the scheme.

Doesn't seem like a real winner to me.



Offline m320au

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Re: [-] Book Value
« Reply #26 on: January 02, 2014, 10:27:01 PM »
Hiya,

Haven't read through all the above (as I'm away on holiday and short on time) but, I noticed something strange with an order for 25 identical new 757-200's I have just finished receiving.

The first 20 aircraft I took delivery of are showing a value of $52m, ie, more or less the list price for a +15t Mtow version which they are, and in my opinion their actual value - and the last 5 aircraft are showing a value of $29m, ie, just over half the list price and in my opinion therefore considerably less than their value.

Does this mean if I try to sell my last 5 aircraft, their actual value will be listed as $29m in the used market? If so, this could present an issue ....

Regards
America One (jet age)


Online Sami

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Re: [-] Book Value
« Reply #27 on: January 02, 2014, 10:28:08 PM »
Does this mean if I try to sell my last 5 aircraft, their actual value will be listed as $29m in the used market? If so, this could present an issue ....

No.

Forget anything about the old "value" and it's display on the market and so forth... Selling prices are not related to that anymore.

Offline meiru

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Re: [-] Book Value
« Reply #28 on: January 02, 2014, 10:55:57 PM »
When you sold the plane above cost (13 vs. 10) you have to pay tax on the gain on sale so it is 'real money'...

I'm buying an aircraft at the same time for the same price = same loss = 0 ...


and sami... that's how it works... when I am designing a computer program or system, my first thoughts are always about problems, crashes, attack schemes and so on... you cannot fix the thing later, you have to design it correctly from the begining

every system will always be exploitet if possible... do you know why I bought my first ATR72 in this game? ... well, it did cost 18M, but I realized, that it was december 30. and I had a profit of more than 18M ... so, I bought it, got 5M back from the tax and payed only about 13M ... that made her the cheapest ATR72 on the market... is this exploiting the system? ... the rules are the same for all
« Last Edit: January 02, 2014, 11:05:25 PM by meiru »

Online Sami

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Re: [-] Book Value
« Reply #29 on: January 02, 2014, 11:23:52 PM »
I'm buying an aircraft at the same time for the same price = same loss = 0

A purchase of a plane does NOT incur you losses on the day of purchase for the amount of purchase (like it currently still does). You lose the amount in cash but it goes into your balance sheet as an asset, and there is absolutely nothing in the income statement about the purchase. But for the sale of the plane there is, and you need to pay the tax for the price premium.

So with this switch thingy you will end up with less cash when you started, but more value in assets and larger depreciation. So overall not really worth it.

Offline meiru

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Re: [-] Book Value
« Reply #30 on: January 02, 2014, 11:34:10 PM »
(like it currently still does)

yup, so... then it's all fine for the future from that standpoint... remains the question if you want to prevent people from lowering the values of their aircrafts with some tricks... I don't know if they can win something by doing it... if not... it may not be worth it... (but if the loss made by this is tax relevant... so it may be questionable because this could allow them by lowering the CV to make no profit and thus not pay any tax... you lose your money, that's for sure, but in an other way... ok, but it might be not such a problem... losing 1M in CV or paying 300k tax would be the options... maybe that's good enough and nobody would do it... altough... if you have a lot of aircrafts in the desert... and you know, that you lose their value over the time... you may be willing to do it... *hmm*)
« Last Edit: January 02, 2014, 11:45:20 PM by meiru »

 

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