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Business Management
7th International Scientific Conference “Business and Management 2012” May 10-11, 2012, Vilnius, LITHUANIA

ISSN 2029-4441 print / ISSN 2029-929X online ISBN 978-609-457-116-9 CD doi:10.3846/bm.2012.036 http://www.bm.vgtu.lt
© Vilnius Gediminas Technical University, 2012

THE INFLUENCE OF DEPRECIATION POLICIES ON FINANCIAL STATEMENT ANALYSIS: A CASE STUDY OF AIRLINE INDUSTRY Xiaosong Zheng1, 2, Yingya Guo3, Jiali Xu4
Tallinn School of Economics and Business Administration, Tallinn University of Technology, 19086 Tallinn, Estonia Email: xiaosong.zheng@ttu.ee 2, 3, 4 Sydney Institute of Language and Commerce, Shanghai University, 201800 Shanghai, China Email: xiaosong.zheng@shu.edu.cn; 3yyguo09@shu.edu.cn; 4zerozita@shu.edu.cn Abstract. The public and professionals are gradually taking the quality of financial statement of airline’ companies into account since the global airline industry plays a vital role within the international business community. However, methods of airline financial reporting and disclosure vary significantly from country to country due to different accounting standards. This disparity in accounting disclosure represents a large obstacle to the growing globalization of business as international investors need comparable financial information to assess the financial health of different companies. This paper will illustrate one of issues observed in the airline industry called the estimation of depreciation expenses, which exerts a huge influence on the stated revenue since depreciation is a major expense in the industry. Assisted by classical financial analysis, we find that companies can perform different depreciation estimation practices which are allowed by different accounting practices to manage earnings. Keywords: financial statement, depreciation policies, airline industry, estimation, ratio. Jel classification: M41
1

1. Introduction The airline industry has faced complex regulations and divergent accounting standards (KPMG


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