Airline

A) Annual depreciation expense per $100 of gross aircraft value

For Delta:

1) prior July 1, 1986 (100 ?100 x 10%) / 10 = $9

2) from July 1, 1986 through March 31, 1993 (100 ?100 x 10%) / 15 = $6

3) from April 1, 1993 (100 ?100 x 5%) / 20 = $4,75

For Singapore Airlines:

1) prior to April 1, 1989 (100 ?100 x 10%) / 8 = $11.25

2) from April 1, 1989 (100 ?100 x 20%) /10 = $8

B) In the studied case, both airlines are following a very similar pattern for calculating the depreciation expense to account to the operational sheet. So for instance, both companies as per the notes given, they are revising the depreciation formula, with intended at obtaining a reduction in the final expense for the period. Additionally both companies reduced expenses in similar ratios.

However, both companies are using different approaches. Delta Airlines is increasing the depreciable lives, but also decreasing the salvage value, whereas Singapore is increasing the depreciable lives too, but increasing the salvage value. This approach means, as per last note, that Delta will spread the useful lives of the airplane for 20 years, and likely forced to give a minimal residual value to the aircraft after life expiration. But Singapore Airlines will eventually consider the aircrafts upon the companies expiration life, yet profitable in the market, and likely expect to obtain additional profit for third airlines such as Delta Airlines whose useful life is double to that of Singapore Airlines?

These differences, from my understanding can only be explained by the pursuit of both companies to increase (improve for Delta Airlines) operating profit; but in a way, that while Delta is forced to do so as last resort due to alarming financial constraints, to extent to the maximum the life of its fleet, Singapore Airlines is still enjoying operating profits, and thus is just a way of looking better to investors, while maintaining a relatively new fleet, and assuming that there will likely be third airline carriers eager to purchase 10 year's life aircrafts at the 20% salvage value estimated under the depreciation expense formula.

I do not see any improper treatment, it is a decision taken voluntarily by the companies in the pursuit of maximizing benefits according to the situation (financial, economic, alliances, etc) they are jockeying in.

Questions #4 Singapore Airlines maintains depreciation assumptions that are very different from Delta's. What does it gain or lose by doing so? How does this relate to the company's overall strategy?

As explained in answer

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