This thread is opened to keep all the questions related to the upcoming accounting change in one place ..
Also do note that this thread is for questions only, not requests.
Can we get some sort of tax guidance included in the new system? It would be nice to have a message somewhere indicating estimated taxes based on the numbers and the date it is expected to be paid for planning purposes. If I have $100 million in cash and spend $90 million on slots, I owe tax on $100 million and not just $10 million so if I need to have $30 million in cash available for the taxman, I'd like to know this. IRL airlines have a CFO that would tell you this stuff clear as day versus having to dig around and running the numbers yourself.
Since taxes are paid in arrears, accrued tax liabilities should also be reflected somewhere as a liability on the balance sheet.
Edit: Would it also be possible to have a filter option on the income statement for base airports? It would be awesome if I could pull the financials just for one base to make an educated decision on whether or not that base is profitable. Some items (marketing) would have to be prorated, but otherwise it looks like the numbers are there for everything else.
Tax advance payments will be probably weekly from now on, and the tax system will also take into account any losses created on previous years. However these haven't been done yet.
And income/cashflow sheets do have a filter for the base already (top-right corner, next to "time period"). Some fees are allocated only to the hq airport.
Quote from: sami on January 10, 2014, 06:10:43 PM
And income/cashflow sheets do have a filter for the base already (top-right corner, next to "time period"). Some fees are allocated only to the hq airport.
I just noticed this--this is awesome. It seems that some of the HQ costs could be spread to the other airports base (staff training based on headcount, for example). Another small "feature request" would be to have the bold items (total operating expenses, etc.) have the green arrow dropdown for each base so you could compare the operating profit between bases at a glance since the numbers are already crunched and available when filtering by base. The numbers are obviously off a bit because of some costs being allocated to HQ, but if the costs were spread it would make things just perfect :)
Should prepaid leases be allocated to the HQ at all times or allocated to delivery base? I put in a big order for 50 aircraft that was direct purchase that will be delivered across my 3 bases (non-HQ airport), but the expense is booked as aircraft leases at my HQ.
Additionally, since when leasing new aircraft you pay 1 month's lease as a delivery fee, shouldn't this be listed as leasing fees instead of prepaid leases? I recently put an order in for leased aircraft from the manufacturer and there are no charges showing.
Quote from: sami on January 10, 2014, 05:42:22 PM
If you are playing in a game world you can also preview the financial staments. However please note that these pages are still partly incomplete and all data does not yet show up there, or is incorrect as the old accounting system is still in force.
"For the transition please note the following:
[....]
-Any newly ordered or purchased planes will be depreciated according to the new system."
Does this apply from now, or from the go-live of the new system?
All planes ordered after the new system is live will be depreciated/taxed according to the new system. You may see depreciation expense on aircraft details page already for some planes, but those will be set to 0 as they are paid/taxed already.
Hi Sammi,
I applaud your decision to move to the accrual system, this will give us all a much better idea of how we are doing.
I would question the assignment of slots as an intangible asset, as it is clearly the asset of the airport authority, they charge the non-reoccurring lease fee and generate revenue from the use of that landing slot by our airlines with revenue from Passenger taxes etc.
As we effectively lease these slots for a onetime fee from the airport authority, and do not have the ability to sell, sublease, rent or trade these slots, Shouldn't these slot costs should be considered a non-recurring expense. That expense would therefore be tax deductible from our operating Income as an operating expense for the period the payment was made.
Just my thoughts.
Thank you for your continued dedication to the improvement of this awesome game!
Caretakerbc
The ability to sell/trade the item (here slot) is alone not a reason to deduct the cost of the asset immediately.
Anyway, this has been already discussed in the past, and this is the approach that has been chosen for it for now.
Quote from: sami on January 11, 2014, 08:48:05 AM
All planes ordered after the new system is live will be depreciated/taxed according to the new system. You may see depreciation expense on aircraft details page already for some planes, but those will be set to 0 as they are paid/taxed already.
If I follow this logic correctly, this means until the update is officially implemented, our year end aircraft purchases will still reduce our tax burden for the calendar year it falls in. Correct?
Hopefully, the update is implemented for Jan 1 (Jan 16?) of each game world's year, so that we have the ability to time our purchases accordingly.
sami, I bought three planes for a total of $159.5m and paid for a fresh D-check on one of them. However, the "Deposits on flight equipment purchases" account only has $157.3m - the difference being the cost of the D-check. I checked the income statement to see if the D-check was expensed as MX, but my MX expense for the week to date was only 26k so it's not there. However, the cash flow statement does show the D-check in the long-term aircraft MX section, so i think it's just a problem with the balance sheet.
edit: this is in the test world
To Sami
Game: Accounting Test
Airline: Aerial Transit Company https://www.airwaysim.com/game/Info/Airline/View/24/138#AirlineInfo
First, congratulations for the improvements, for setting-up a demo game, and for listening and exchanging your opinions with the players.
Second, it seems that if we buy a second hand plane (or new with discounts) below "recommended price", the value that is accounted for on the balance sheet under Assets/Non-current assets is the purchase price, regardless if the purchase price is below (sometimes 30% to 40% below) the "recommended price". This means that:
(a) the "company value" will not increase by buying an under valued aircraft or by buying large quantities of new aircraft, and
(b) the amount of secured loans is linked with the purchased price, not with the "recommended price", which results in lower borrowing power.
Is there a more realistic way of attributing a dollar value to an asset purchased below market value? One of the fun things of this game is to buy cheap. In the new format the impact of the player's buying skills is reduced to one single item, cash in hand. Both borrowing capability and company value disappear from the equation.
Finally, I already can see a way around the issue, maybe (or maybe not) against the spirit of the game:
(1) buy cheap;
(2) sell to an alliance member/friend at "recommended price";
(3) buy it back at the same price.
No player made or lost money, and no taxes to pay as the selling and buying prices are the same. The con is 4 weeks lost until final delivery. The gain is an higher borrowing capability, which can be important at the start-up stages, and higher company value (for prestige purposes, self satisfaction, etc.).
Care to comment?
LA
Lotus - a couple of clarifications to your post and Sami can comment on the rest.
1) The amount of secured loans available to you is not linked to the purchase price of the aircraft, but rather the Bank's assessment of the value of the aircraft.
2) If you sell your plane to a friend at the recommended price, you will owe taxes on the gain on sale between the purchase price and the sale price.
3) I agree, that having access to a market value view of one's aircraft (similar to the historical CV) is a good idea because otherwise it is very difficult to fairly compare the CV of different airlines...
The 'recommended price' has got nothing to do with accounting. The initial book value is always the price you paid for it (and this IS the realistic method for it).
Also, dmoose; balance sheet is now adjusted to show D check payments before delivery.
QuoteDmoose 1- The amount of secured loans available to you is not linked to the purchase price of the aircraft, but rather the Bank's assessment of the value of the aircraft.
Dmoose 2- If you sell your plane to a friend at the recommended price, you will owe taxes on the gain on sale between the purchase price and the sale price.
Sami 3- The 'recommended price' has got nothing to do with accounting. The initial book value is always the price you paid for it.
1) Yes, and the bank's assessment is the purchased value. In other words, the company buys 50 aircraft and gets a discount of say 30%. The value of the aircraft is not 100%, but 70%. The bank's assessment is 70%.
2) Indeed, thanks.
3) Fine, in that case just re-read my post and instead of "recommended price" read "initial book value". And the question remains:
is there a better way of assessing the value of an aircraft purchased second hand or new below market value?I would like to emphasize that
I am not complaining. I am just pointing out something that can probably be improved and/or asking for clarifications.
Tks
LA
This has been talked at the feature rq forum's thread (check that one for details) but to sum it up: the book value of the aircraft is always based on the price you paid for it, and depreciation is counted from there. Companies may re-valuate their assets if needed, but commonly that is used only for intangible assets like goodwill. And for the scope of the game the "market value" is something that is determined independetly between players when they sell the planes and it will be more dynamic than before, and it is not a mean to base for any revaluations of the aircraft.
= book keeping value and actual market value have nothing in common (anymore).
Thanks.
LA, IMO there might a conceptual misunderstanding behind your point on AC value.
If you "underpay" an AC by 10 millions, you will also have 10 millions more cash than if you had paid the recommended price. And cash IS company value too.
That means that your company value right after the purchase will be the same regardless the price you have paid for the aircraft.
On the contrary, "paying cheap" is good for the long term perspectives of your company value. These extra 10 millions cash may eventually allow you to increase your investment in ACs and slots, and possibly earn more cash in the future than if you had overpaid the aircraft.
Yes, but then there would be incentive for players to clog up production lines and resell aircraft (sound familiar?). If an aircraft is $100 million and I get a 20% discount to $80 million, I have an $80 million aircraft (worth $100 million on the open market) and $20 million in cash. If I can sell the aircraft for $100 million then I earn $20 million. Therefore, there is a huge incentive for me to jam up the production lines and resell popular models.
IMO the easy solution would be to eliminate the discounts for direct purchase (but keep for leasing) since immediate resale is unrestricted. This would remove part of the incentive to jam up the production lines.
Quote from: abez on January 12, 2014, 07:28:31 PM
LA, IMO there might a conceptual misunderstanding behind your point on AC value.
If you "underpay" an AC by 10 millions, you will also have 10 millions more cash than if you had paid the recommended price. And cash IS company value too.
That means that your company value right after the purchase will be the same regardless the price you have paid for the aircraft.
On the contrary, "paying cheap" is good for the long term perspectives of your company value. These extra 10 millions cash may eventually allow you to increase your investment in ACs and slots, and possibly earn more cash in the future than if you had overpaid the aircraft.
I think I see the point LA is trying to make....
Assuming the borrowing limits are not affected by the value of the aircraft (IDK how they are determined, but it ought to be tied largely to the profitability of the airline - i.e. ability to support the payment, with some buffer built in based on credit rating), then, ceteris peribus, it is more efficient to pledge an aircraft to its market value, allowing more headroom for future borrowing.
The extent that an airline cannot do this, it puts another constraint on its borrowing. This is probably more important to younger/smaller airlines, as there comes a point with larger airlines where one has more aircraft than can be borrowed against.
Quote from: abez on January 12, 2014, 07:28:31 PMIf you "underpay" an AC by 10 millions, you will also have 10 millions more cash than if you had paid the recommended price. That means that your company value right after the purchase will be the same regardless the price you have paid for the aircraft.
Hi abez,
A valid point which I am aware of. I think you may have missed my point, an example to illustrate.
Under the new accounting system, which I am in favour of, two things --(a) and (b) on my previous post-- are different:
OLDbuy an aircraft with market value of 10m for 7m,
company value increases by 3m,
borrowing power with collateral increases by 3m.
NEWbuy an aircraft with market value of 10m for 7m,
company value doesn't change,
borrowing power with collateral doesn't change.
So under the old system the incentive to hunt for bargains is much higher. That is my point, nothing more and nothing less. And my point leads to one question: can we do better. Sami replied, nope can't do. Issue closed.
LA
PS: Sami says "Companies may re-valuate their assets if needed, but commonly that is used only for intangible assets like goodwill."
- I agree, for depreciation purposes (which corresponds to company value);
- But not when the asset is pledged as collateral for a loan. Lenders do not care about the purchased price (which sometimes is zero in case of gifts and donations), only the current market value.
Quote from: LemonButt on January 12, 2014, 07:47:19 PM
Yes, but then there would be incentive for players to clog up production lines and resell aircraft (sound familiar?). If an aircraft is $100 million and I get a 20% discount to $80 million, I have an $80 million aircraft (worth $100 million on the open market) and $20 million in cash. If I can sell the aircraft for $100 million then I earn $20 million. Therefore, there is a huge incentive for me to jam up the production lines and resell popular models.
Firstly, nothing assures that you can sell the plane for $100mil. You may sell it for $70, or $120mil ... If you sell if for the $100mil, you will pay taxes of the difference (let's say 30% of the $20mil profit, meaning -$6mil into taxes of the transaction; so your profit for selling the plane bought for $70mil, which manufacturer listed as $100, is $14mil) - unless you have tax-deductible expenses that cover it. But in the new accounting model you will end up paying taxes more often than before since a/c purchases are not tax deductable.
And look it by any way, ultimately the proper accounting system discourages people to glog the prod.lines just to get some easy gains, unlike in present system where you could 'reset' your taxes by just making a big order for the future.
Quote from: LotusAirways on January 12, 2014, 09:20:25 PM
OLD
buy an aircraft with market value of 10m for 7m,
company value increases by 3m,
borrowing power with collateral increases by 3m.
NEW
buy an aircraft with market value of 10m for 7m,
company value doesn't change,
borrowing power with collateral doesn't change.
Collateral for borrowing (ie. value of aircraft as loan security) has been already changed some time ago away from the old aircraft value metric (what you referred here as "market value" in old system). How bank values your aircraft when taking out a loan has got nothing to do with the book value of the aircraft that you have, so it's not necessarily valued at $7mil by the bank, may be more or may be less. But if it was a bargain to buy, then bank values it as more than your paid price.... (in the test game I bought an old A300 for $73mil for example, but bank values it only for $63 when I try to take a loan against it)
(And also you confuse again things by including this "market value" also in the "new" model. "Market value" of the plane is the value an airline is willing to pay for the plane. And if you bought it for $7, then it's market value in this case was $7mil.)
So to sum it up. Forget everything you used to remember about the old "aircraft value".
"How bank values your aircraft when taking out a loan has got nothing to do with the book value of the aircraft that you have, so it's not necessarily valued at $7mil by the bank, may be more or may be less. But if it was a bargain to buy, then bank values it as more than your paid price."
Thanks. You may need to look at the accounting demo do, as I bought a below market value/market price/recommended price airplane and when applying for a loan the bank valued the airplane at... purchased price.
""Market value" of the plane is the value an airline is willing to pay for the plane. And if you bought it for $7, then it's market value in this case was $7mil."
I use market value as in real world market value/market price.
FYI to players in the accounting test game .... tax man was sleeping, and didn't work properly. It has been fixed, and it will take any pending taxes (= if any profits) in one big lump and then will start to function normally on the next week.
(I have also manually forwarded the time a few days due to this)
Quote from: LemonButt on January 12, 2014, 07:47:19 PM
Yes, but then there would be incentive for players to clog up production lines and resell aircraft (sound familiar?). If an aircraft is $100 million and I get a 20% discount to $80 million, I have an $80 million aircraft (worth $100 million on the open market) and $20 million in cash. If I can sell the aircraft for $100 million then I earn $20 million. Therefore, there is a huge incentive for me to jam up the production lines and resell popular models.
IMO the easy solution would be to eliminate the discounts for direct purchase (but keep for leasing) since immediate resale is unrestricted. This would remove part of the incentive to jam up the production lines.
Quote from: sami on January 12, 2014, 09:32:08 PM
Firstly, nothing assures that you can sell the plane for $100mil. You may sell it for $70, or $120mil ... If you sell if for the $100mil, you will pay taxes of the difference (let's say 30% of the $20mil profit, meaning -$6mil into taxes of the transaction; so your profit for selling the plane bought for $70mil, which manufacturer listed as $100, is $14mil) - unless you have tax-deductible expenses that cover it. But in the new accounting model you will end up paying taxes more often than before since a/c purchases are not tax deductable.
And look it by any way, ultimately the proper accounting system discourages people to glog the prod.lines just to get some easy gains, unlike in present system where you could 'reset' your taxes by just making a big order for the future.
Collateral for borrowing (ie. value of aircraft as loan security) has been already changed some time ago away from the old aircraft value metric (what you referred here as "market value" in old system). How bank values your aircraft when taking out a loan has got nothing to do with the book value of the aircraft that you have, so it's not necessarily valued at $7mil by the bank, may be more or may be less. But if it was a bargain to buy, then bank values it as more than your paid price.... (in the test game I bought an old A300 for $73mil for example, but bank values it only for $63 when I try to take a loan against it)
(And also you confuse again things by including this "market value" also in the "new" model. "Market value" of the plane is the value an airline is willing to pay for the plane. And if you bought it for $7, then it's market value in this case was $7mil.)
So to sum it up. Forget everything you used to remember about the old "aircraft value".
I will join the new accounting system demo game here in a few minutes, but I just want to get my 2 cents worth in on this. It certainly appears that there is far less reward for ordering planes with large discounts for whatever reason (discount to resell, tax evasion, etc) which brings to mind two issues.
First, I agree with LotusAirways on the fact that there should be some way to account for the gain, realized or unrealized, from prepaying and/or placing large orders and getting a significant discount on new planes. Lets say, for example, I buy 40 $100m planes at a discount of 36% (launch discount, 100% prepay discount, full large order discount) and pay $64m a piece for them. After 25 years, I have lost $3.6m a plane in salvage value if I understand the new system correctly (from $10m a plane to $6.4m a plane), plus the "new" value of that plane may be $110m by the time it is delivered. What I am trying to get at here is, make the depreciation bottom/salvage value based on a full priced plane, even if depreciation starts significantly lower so there is more incentive to prepay planes.
Second, if there is a way to exploit the new accounting system, it will be exploited. If I place the same order as above and have $36m in instant equity in every one of those planes, you better believe I am going to clog any popular line I am not using for my own profit. For at least 10 years from the start of a game, there will be profit to be made on A32x, 737NG, A330, and 767 at least (sorry, just being honest and objective here.) I am paying taxes anyway, no way around it now, so why not find new ways to earn a profit? This plays into my first statement where, even if not 100% realistic, making the value at delivery of any plane purchased the current new build list price would go a long way to stopping the above described exploit.
Jetwest #1: I believe that the salvage value from depreciation is different than the scrapping value. The scrapping value is independent of the book value and therefore you should not be losing that $3.6m.
Jetwest #2: This is actually pretty tricky because if sami were to do as you propose, take an example where you buy for $70m and it's worth $100 in five years when the plane is delivered, and you sell it for $90. You shouldn't have a $10 loss on something you paid $70 for.
The $30m in growth (from 70 to 100) could be considered a taxable gain but that would inflate people's tax bills. If you want it to be an non-taxable gain (to defer the tax until the sale), then you would have a book value of $100, a tax basis of $70, but you would have to track both numbers - which will likely be confusing to a lot of users and seems unnecessarily complicated.
Back to the test game itself ... everything working logically? At least no bigger issues so far, thus estimated launch would be this thursday/friday probably.
Only thing what I have to do is test the conversion from old->new for a/c orders and such.
Already a few notes of the conversion, details later:
- All existing slots will be set to zero value, new slots will have the value allocated normally according to the new system. This is since you've already deducted them as expenses. This may drop your company's total value a bit, but not much as the slot value calculation hasn't been online very long (has been just to make sure it was working).
- All existing owned aircraft were already written off as expenses fully but due technical reasons they have to be depreciated according to the new system too. However most likely in their case the depreciation won't be written as an expese to the income statement (their value will just reduce according to the 25y-schedule), if it's technically feasible. (it's the correct way to do it, but you will then have owned planes that do and do not create the depreciation expense, depending on when they were bought - any planes bought after new system will depreciate normally. So this may be confusing but it's part of the transition and does not affect any new airlines or new games).
Quote from: LotusAirways on January 12, 2014, 09:20:25 PM
I think you may have missed my point, an example to illustrate.
Now I got it ;)
Well, Sami's reply says everything.
Quote from: sami on January 13, 2014, 03:34:43 PM
Back to the test game itself ... everything working logically?
I am desperately trying to test the sale of an aircraft and its impact on BS, CF and Income Statement.
Any Test Game participant could volunteer to purchase an A319-100 that I listed for sale in the UM?
Seller is "IFRS Test". Price is near to lowest allowed.
Thanks
Quote from: abez on January 13, 2014, 05:48:41 PM
I am desperately trying to test the sale of an aircraft and its impact on BS, CF and Income Statement.
Done. Seems to work perfectly in all financial statements, and tax loss carryforwards.
Only remark: the total value of the aircraft of the sale appears in the cashflow category "Capital Gains". Capital gain refer to a profit from the sale of an asset, i.e. the concept of "profit from sold aircraft" that appears in the income statement. You may want to rename that part of the cashflow statement to avoid confusion.
Did you sell it already?
While you're at it, you can buy my shiny new A300-600R .. :p
bought it!
Just joined the test game. First UI thing I noticed is that clicking "Income Statement" through the dropdown menus shows the "new" income statement. Clicking on "Money" at the top of the screen shows the "old" income statement.
Also, my purchased aircraft did not show up next to "purchased aircraft" on the new income statement. It shows up correctly on the old one.
Thoughts on the financial changes:
Honestly, I just want a bottom-line "am I making money?" number. All the rest I really have no interest in at all. Zero. I don't pay much attention to all the lines between "sold tickets" and "Result" on the old income statement, other than fuel and payroll. There's a reason I went to school for I.T. and not Business School. It's all just too much information for me. I get that it's necessary, but that's why my virtual airline employs virtual bean counters to figure it all out. As long as there is somewhere I can click that gives me the bottom line number, everything else might as well be in Cyrillic for all the sense I can make out of it.
Anyone willing to lease a shiny A319-100? ;)
Listed in the UM at a value of 40.000.000$ for lease only, seller IFRS Test.
I'd like to see how the pre-paid revenue is going to display in my cashflow statement.
P.S. Cash flow statement layout clearer now
Quote from: tvdan1043 on January 13, 2014, 07:39:44 PM
Honestly, I just want a bottom-line "am I making money?" number. All the rest I really have no interest in at all. Zero.
In your cashflow statement, the line "Net change in cash flows" is basically your old bottom-line.
You can keep ignoring all the rest ;)
Quote from: tvdan1043 on January 13, 2014, 07:39:44 PM
Just joined the test game. First UI thing I noticed is that clicking "Income Statement" through the dropdown menus shows the "new" income statement. Clicking on "Money" at the top of the screen shows the "old" income statement.
Incomes/New/ is a temporary address
Quote
Also, my purchased aircraft did not show up next to "purchased aircraft" on the new income statement. It shows up correctly on the old one.
This is absolutely correct, pls read the manual.
Quote
Honestly, I just want a bottom-line "am I making money?" number.
Cash flow statement tells if you are losing or gaining money
Quote from: sami on January 13, 2014, 07:53:34 PM
This is absolutely correct, pls read the manual.
I read the manual and there was not an explanation of the "Purchased Aircraft" line item of the new Income Statement.
If there is a line item for "Purchased Aircraft" and it remains zero after buying two planes on the used market, even after delivery, what is that line item for?
It's needed for the transition period, old orders are counted as expenses still.
This will become less of a game and more of ACC201 practice ....
Sami, once the accounting change occurs, when will the tax calculation change? For example, right now on the new income statement it shows that I have a huge tax liability because I haven't paid tax on all the plane orders over the past three years...
Profit/Loss: 27.2 bn
Taxes Paid: 0.9 bn
Taxes Owed: 7.3 bn
I assume that I won't retroactively owe 7.3 bn in taxes, but rather the system will reconcile your taxes under the old system and you will pay any tax liability or receive a refund as required. Then the tax liability will start accruing on day one using the new income calculation. Correct?
Thanks...
Another question. How will partially prepaid aircraft work under the transition?
Example: I paid $5m in advance and owe $20m on delivery.
The $5m was deducted from my taxable income last year, but under the new system, will the remaining $20m be tax deductible as well? I assume it would be tax deductible to avoid confusion, but wanted to check. If if it's not then you would have depreciate only the $20m and not the remaining $5m in order not get a double tax benefit, which seems like a lot of unnecessary data tracking.
Thanks.
Taxation; it will switch to new system on the exact moment it goes live. And during the first game year of the new system it takes into account the losses only from current year (vs. last 3 years) for any existing airlines when it starts - or in other words the first day of the game year when the new system goes live is the date to which it checks backwards the previous losses (instead of 3 yrs backwards for any new games) .. (so after 3 years also existing airlines are fully in the new tax system). So check your new incomesheet and see what it shows now for current year, and that is the new taxable 'balance' (but for now the tax overview at the bottom of income statement is not correct as the 'live date' is not configured yet!). If you by that still owe taxes they will be returned normally.
Any aircraft purchases made within the old system (ordered before system is live) are treated in the old way like the transition notes say. So $5+$20mil will both show under 'purchased aircraft' as immediate taxable losses.
Quote from: sami on January 14, 2014, 11:13:43 AM
Taxation; it will switch to new system on the exact moment it goes live. And during the first game year of the new system it takes into account the losses only from current year (vs. last 3 years) for any existing airlines when it starts - or in other words the first day of the game year when the new system goes live is the date to which it checks backwards the previous losses (instead of 3 yrs backwards for any new games) .. (so after 3 years also existing airlines are fully in the new tax system). So check your new incomesheet and see what it shows now for current year, and that is the new taxable 'balance' (but for now the tax overview at the bottom of income statement is not correct as the 'live date' is not configured yet!). If you by that still owe taxes they will be returned normally.
Any aircraft purchases made within the old system (ordered before system is live) are treated in the old way like the transition notes say. So $5+$20mil will both show under 'purchased aircraft' as immediate taxable losses.
Thanks...addresses a question I had in another thread. I presume that the exact game day for go live will be announced so we can plan accordingly.
There won't be exact preplanned game dates, but plan for thursday midday EU time for the change (whatever the game dates may be then)..
Quote from: sami on January 14, 2014, 07:27:06 PM
There won't be exact preplanned game dates, but plan for thursday midday EU time for the change (whatever the game dates may be then)..
If you mean CET, then noon there would mean about 6:00 a.m. EST (e.g. New York), 3:00 a.m. PST (e.g. L.A.). Ok will watch for announcement, and plan to be on around then on Thursday. Thanks.
For others who want to do a quick lookup...
http://www.worldtimezone.com/index.shtml (http://www.worldtimezone.com/index.shtml)
"Last chance" for feedback and comments based on the test game ....
Should the aircraft delivery fee (1 month's worth of lease) be allocated to the date the order was placed or the date the aircraft is delivered? I just put in a big $240 million order and got a $42 million expense on the income statement for the current week, but in using the accrual method I believe this cost should be allocated to the delivery week versus the order week. It should also technically remain on the balance sheet somewhere as an asset. If another airline were to purchase my airline, then those delivery fees are prepaid expenses that would be viewed as an asset.
For leases you prepaid 5 months and 1 month as a delivery fee which is non-refundable, so that's why it's written down as expense (immediately)... Perhaps not the most the realistic way, but otherwise would be rather complicated and would require other changes. But in theory yes, you're right.
(or just change it 6 months prepaid?)
Quote from: sami on January 17, 2014, 06:31:37 PM
For leases you prepaid 5 months and 1 month as a delivery fee which is non-refundable, so that's why it's written down as expense (immediately)... Perhaps not the most the realistic way, but otherwise would be rather complicated and would require other changes. But in theory yes, you're right.
(or just change it 6 months prepaid?)
Since the fee is non-refundable, then it should be expensed when it is incurred, thus, I think your implementation is more correct.
Quote from: sami on January 17, 2014, 06:31:37 PM
(or just change it 6 months prepaid?)
I think players would prefer this simply due to the fact they get something for their money versus a one time expense.
If the expense is taken immediately, this could be a possible way for players to "game" the system and dodge the tax man, especially since lines like the A320 in DOTM can have a 10 year lead time. I have a $42 million expense that negated $10+ million in taxes, for example.
I don't think you're really gaming the system that much. Yes you got an immediate write-off, but as schro said, you've lost that money forever, so it doesn't seem that unreasonable to me. I would just leave it as is...
I may have missed it, but has any discussion been had on tax treatment of capital gains? In many (most?) countries, that is treated with a lower tax rate than regular income tax.
It is the same tax rate
I have not placed any order since the go-live of the new accounting system.
DOTM
https://www.airwaysim.com/game/Info/Airline/View/144/129#AirlineInfo
(A) I see in my financial statements some amounts that I do not really understand.
Weeks 33, 31, 30, 28, 27, 26, 24
In each of these weeks, the amount 22.763.290 USD (always the same!) appears (a) negative in income statement [purchased aircrafts] (b) and negative in the cashflow statement [capex/purchased aircraft]
These amounts do not correspond to aircraft deliveries: what are they?
(B) Modification of down payment amounts prior to aircraft delivey (for new purchased new aircrafts): how is the tax treatment?
I modified the purchase orders of two A320-200s to be delivered in 1995. Orders had been created before the go-live.
After the go-live, I increased one down payment from 20% to 60% in week 27 (spent 25 millions), and the other down payment from 20% to 40% in week 33 (spent 13 millions).
These expenditures both correctly appear as fixed assets additions in the B/S, and capex in the cashflow statements (both of them "polluted", though, by the unidentified periodic amount of point A above).
But no trace of these expenditures in the Income Statement.
The initial down payments of 20% had already entered into my taxable result before the go-live. But what about these additional down payments?
As I understand that there will be no taxable depreciation for "old orders", my expectation was to see them in the "purchased aircraft" line of the income statement.
Or they became "new orders"?
Can you please help me to understand?
I'll start here because not sure if a bug or accounting change but best I can tell, you can now break any lease regardless of term for $28,500 regardless of the term. As leasee, I terminated a BAC-500 lease with 2 weeks left...$28.5. - this seemed reasonable. Then I terminate a DC-10 lease with 4 months to go... $28.5k - I was thinking I would pay at least $200-$500k.
Then as lessor, I had 2 DC-8s returned...no idea what was left on the term, but I got $28.5k back for both of them.
This is leading me to think a bug or something illogical that unintentionally happened as a lease is a binding contract regardless of accounting method. If there is truly no time based penalty for breaking them, then what is to prevent someone taking a 15 year lease and then just terminating at the 8 year D check?
I could go through a whole long list of other points...but will save until the issue with breaking lease vis a vis the new accounting system is better explained or investigated/fixed if a bug.
Spiff - the fee for breaking the lease should be 50% of the remaining payments on the lease. If you are paying 100k a month and have 4 months to go, the fee would be 200k
Right, but that's not what happened...I'm 4 leases broken in past 12 RW hours and each one only cost $28'500 exactly. 2 I broke and 2 someone broke on planes they leased from me. The DC-10 is the one that tripped my alarm since I don't remember what I was paying, but with 4 months to go no way was a 50% penalty only $28,500.
I would post in the bug forum with as much detail for each plane as you can. I have not observed the same issue...
Posted in bug forum with more detail.
I don't see anything in "Airport slot fees" when I open new routes. Is this meant to be or is it a bug?
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?
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
Quote from: philkirk99 on January 31, 2014, 08:58:33 AM
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.
Quote from: Pukeko on January 31, 2014, 09:04:33 AM
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?
Quote from: philkirk99 on January 31, 2014, 08:58:33 AM
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.
Quote from: Iksu on January 31, 2014, 09:32:46 AM
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.
Quote from: RougeCanuck on January 31, 2014, 09:43:43 AM
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?
Quote from: Iksu on January 31, 2014, 09:32:46 AM
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.
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?
I think there were no changes in the code there, so they are written off immediately.
Quote from: sami on April 19, 2014, 04:04:48 PM
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).