Behavioral Implications of Airline Depretiation Accounting Policy Choices

1)What are effects of accounting policy choice on managerial decisions? Depreciation Method; Estimated Useful Lives; residual values.

2) Would you recomend to the managers that they adopt a third set of books? That is should they maintain one set for financial accounting purposes, another set for tax purposes, and third set for for purposes of running the businesses?

3) If managers do not want to maintain a 3rd set of books should they tend to be conservative or liberal in their aircraft depreciation accounting? Explain

Delta Airlines Straight-line over estimated useful lives 20-year life (from date put in service) Residual value = 5% of cost AMR Corporation (Parent of American Airlines) Straight-line 25-year life (30-year for Boeing 777s) Residual value = 10% of cost Singapore Airlines Straight-line 15-year life Residual value= 10% of cost Lufthansa Straight-line 12-year life Residual value= 15%