The following table identifies the changes made to this Subtopic.
This Subtopic provides guidance for accounting for certain property, plant, and equipment assets for entities in the airline industry. It includes guidance on:
- a
The use of unit and group depreciation methods.
- b
- c
Airframe modifications. Airlines have undertaken major programs to modify interior configurations of certain aircraft types—including the reconfiguration and replacement of seats, galley equipment, and storage space—in response to market forces and passenger demands. Since deregulation, such changes have been more frequent. - d
Airframe and engine overhauls. As a result of overhaul requirements established by the Federal Aviation Administration, aircraft airframes and engines must be overhauled within specific intervals. The value and usefulness of an aircraft can be heavily dependent on its stage of overhaul. For accounting purposes, airframe and aircraft engine overhauls encompass all inspections or replacements of major components, which the civil air regulations require at specific maximum periodic intervals to recertify that the frame or engine is completely airworthy.
This Subtopic provides guidance relating to certain property, plant, and equipment assets for entities in the airline industry.
If the modifications of interior configurations of certain aircraft types enhance the usefulness of the aircraft, the costs associated with the changes shall be capitalized.
This guidance addresses the following methods of accounting for overhaul expenses:
- a
Built-in overhaul method
- b
Deferral method.
The direct expensing method is addressed in Subtopic
908-720 (see paragraph
908-720-25-3).
Under the deferral method, the actual cost of each overhaul shall be capitalized.
Rotable parts and assemblies are normally depreciated over their useful lives or service lives according to a group method of depreciation.
This guidance addresses the following methods of accounting for overhaul expenses:
- a
Built-in overhaul method
- b
Deferral method.
The direct expensing method is addressed in Subtopic
908-720 (see paragraph
908-720-25-3).
The estimated cost of the overhaul component included in the aircraft purchase price shall be amortized to the date of the initial overhaul. The cost of the initial overhaul shall then be capitalized and amortized to the next overhaul, at which time the process shall be repeated.
Under the deferral method, the actual cost of each overhaul shall be amortized to the next overhaul.
The cost of the replaced asset net of accumulated depreciation and anticipated recovery value shall be charged to income in the current period. However, detailed records may often be inadequate to permit identification of the cost of the replaced asset; therefore, estimates may be required.