Accounting change - questions and answers thread

[eiva]

I don't see anything in "Airport slot fees" when I open new routes. Is this meant to be or is it a bug?

[Saul Goodman]

Credit rating in MT8;
Why has mine gone from AAA to BB.  I can't find an explanation for this.  All numbers are in great shape; no loans...have been established since beginning, high profits.
Does the new accounting change affects the credit rating in some way? 

[philkirk99]

Help guys - I hold my hands up to being NO accountant and most of what is being talked about in this forum could be in a foreign language, as I don't understand most of it !!!

What I SIMPLY want to know is this. In the old system, when I purchased a/c, it helped to reduce my tax bill. Now, when I order an a/c, it doesn't reduce my tax bill and doesn't even show as a COST in the balance sheet marked "a/c purchases" either at time of order or time of delivery.

In simple terms, what is the situation??

Cheers
Phil

[Pukeko]

Help guys - I hold my hands up to being NO accountant and most of what is being talked about in this forum could be in a foreign language, as I don't understand most of it !!!

What I SIMPLY want to know is this. In the old system, when I purchased a/c, it helped to reduce my tax bill. Now, when I order an a/c, it doesn't reduce my tax bill and doesn't even show as a COST in the balance sheet marked "a/c purchases" either at time of order or time of delivery.

In simple terms, what is the situation??

Cheers
Phil

You can no longer avoid your taxes like you used to. Get used to it.

[Bored]

You can no longer avoid your taxes like you used to. Get used to it.

Could someone explain how the three year rule about losses is counted in taxes? Is that rule now in use and are the losses from previous three years counted or not? There was some talk earlier in thread that it's not counted. Also are the losses counted as a complete tax relief, for example if you lost 10M previous year is all 10M taken out from taxes the next year? If so, is this done when year is complete or discounted per week?

[DavidBurnie]

Help guys - I hold my hands up to being NO accountant and most of what is being talked about in this forum could be in a foreign language, as I don't understand most of it !!!

What I SIMPLY want to know is this. In the old system, when I purchased a/c, it helped to reduce my tax bill. Now, when I order an a/c, it doesn't reduce my tax bill and doesn't even show as a COST in the balance sheet marked "a/c purchases" either at time of order or time of delivery.

In simple terms, what is the situation??

Cheers
Phil

Previously taxes were calculated based on cash, now they are calculated in terms of value. Since buying aircraft doesn't change your value (both cash and aircraft are assets, all you've done is transfer the value from one asset column to another) it doesn't impact your tax exposure.

[DavidBurnie]

Could someone explain how the three year rule about losses is counted in taxes? Is that rule now in use and are the losses from previous three years counted or not? There was some talk earlier in thread that it's not counted. Also are the losses counted as a complete tax relief, for example if you lost 10M previous year is all 10M taken out from taxes the next year? If so, is this done when year is complete or discounted per week?

I don't think a 10M loss would equal a 10M tax rebate, but a 10M reduction in taxable earnings over the period.

[Bored]

I don't think a 10M loss would equal a 10M tax rebate, but a 10M reduction in taxable earnings over the period.

OK, how about if losses from previous year are greater than taxable profits from the current year? Also is the reduction calculated at years end or per week?

Sami, I couldn't find this information anywhere. Could you please help?

[Sanabas]

Could someone explain how the three year rule about losses is counted in taxes? Is that rule now in use and are the losses from previous three years counted or not? There was some talk earlier in thread that it's not counted. Also are the losses counted as a complete tax relief, for example if you lost 10M previous year is all 10M taken out from taxes the next year? If so, is this done when year is complete or discounted per week?

I haven't actually read up on this in detail, and I've only just started my first airline using the new system. So I may be talking rubbish here...

But the way I assume it works is that if you make a loss for the entire year, you can deduct that from the next year's profits.

e.g.
tax rate is 30%

1988: you manage to make a 40 million loss overall. Maybe through selling planes cheaply, scrapping them, I dunno. You don't pay any tax.

1989: You make 30 million in profit. You would be up for 9 million in tax, but you are able to count 30 million of those 1988 losses, so no tax to pay for 1989.

1990: Another 30 million in profit. Still 10 million of losses from 1988 remaining, so you only need to pay 6 million in tax.

That's the only way I can think of that makes sense for losses counting for 3 years.

[LemonButt]

How are base opening costs handled?  Is the full cost tax deductible, meaning if I spent $25 million to open a base then I can deduct the whole thing or is it considered an asset paid for with post-tax dollars?

[Sami]

I think there were no changes in the code there, so they are written off immediately.

[LemonButt]

I think there were no changes in the code there, so they are written off immediately.

I just did it and the full sum goes under office rent, which means it is written off.  This should probably be in the manual somewhere.  I was planning on opening a new base, but was going to wait longer until I had more cash.  However, since it is December if I spend $26 million I can get $8 million of that back via tax refund in January, so it is actually in a player's best interest to open a base in December versus January because of tax benefits (time value of money).