Accounting System Needs Improvement

[oswegobag]

I just discovered a way to cheat big time. You can purchase a million planes at the end of the game year (using up all your money) and it will lower your profit by the amount of the purchases. You can then sell the planes back when you receive them in the next calendar year and you saved yourself all the tax liability from the previous year.

The accounting system needs to be changed and not make aircraft purchases part of profit, we should be taxed on the value of the company. Depreciation costs should also be accounted for.

Any comments out there?

[swiftus27]

In real life anything considered a "prepaid" is actually an asset and not a liability.  It is certainly not an expense.  In fact, the leasing company would NOT put it on their books as earned income until those months have passed. 

The 4 months that you pay for a plane in advance actually should count against you.   I am not a CPA, but I do know a few of the GAAP rules (Generally Accepted Accounting Practice). 

Think of it this way, if you purchase season tickets to your favorite sports team a year in advance, they cant claim it as income until after each game is played. 

[oswegobag]

I meant to say that plane purchases should not be part of operating expenses for the year (I said profit).

[swiftus27]

Here are other accounting things to consider:

In real life, you do the following:

1.  You CAN write off lease payments after each period expires.  If this were not the case, everyone would lease 30 planes on December 31st.
2.  You CAN write off depreciation annually.  If your plane's value drops from 30 to 25 million, you should be able to take 5 million off of your bottom line.  However, also in real life, there are "schedules" that say how long an item can be depreciated for (a business, for instance, can depreciate a car over 20% of the initial purchase price over 5 years.

I would be happy if there were more items in-game that push us towards purchasing planes instead of leasing them.

[swiftus27]

I meant to say that plane purchases should not be part of operating expenses for the year (I said profit).

Again, they are not considered as expenses in real life.   Capital purchases could never be considered an expense.

When you buy a plane, it is considered an asset.
Any loan against the plane would be considered a liability.
The ONLY expense you can claim is depreciation.

When you lease a plane, you can NOT claim it as an asset on your balance sheet.
The lease itself is considered a liability
A lease payment is an expense only after a period passes (or companies would prepay entire leases to take advantage of the tax code)
So, if you pay four months up front and the plane will be built two years from now, you would only claim the lease payments on your taxes when the plane is in your possession for those four months.

[Kontio]

I agree with what was said above. The current system is unfair. Little airlines have to pay taxes and big airlines can buy new planes and pay no taxes at all. That can't be right!

[cashacasha]

I'm sure the BOSS will fix that problem,Thanks for the hint!!