Question
You are an accountant working for an airline. As senior managers look ahead as their business re-opens, the airline's committee has asked you to prepare
You are an accountant working for an airline. As senior managers look ahead as their business re-opens, the airline's committee has asked you to prepare a business report for them which:
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Explains whether the airline is permitted to reverse the impairment expenses recognised during the Covid-19 pandemic for the following assets, once the business returns to normal in 2022, with specific references to the Australian Accounting Standards:
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Goodwill
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Aircraft
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Investment in Helloworld Travel Ltd. (ASX: HLO) (the airline's accounts for this investment as an
associate).
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Software intangibles.
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Background info
COVID-19 has caused severe disruptions to the economies. Many companies are operating under significantly different circumstances to those existing 2 yrs ago. Especially, the airline industry has been severely impacted.
With international borders closed, and state borders unpredictably opening and closing for much of the COVID-19 pandemic, an airline company recognised large impairment expenses in 2020 and 2021. The airline eported an impairment expense in 2021 of $270 million and in 2020 of $1,456 million.
For the reporting period ended 30 June 2021, the airline reported an underlying loss before tax of $1.823 billion and a statutory loss before tax of $2.35 billion.
With the re-opening of international borders in November 2021 the airline industry has started to rebuild. Airlines are spending considerable amounts to retrain and re-certify pilots who have not flown for more than 90 days, and to service mothballed aircraft to make them ready and safe for flights.
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