Question

Use notes to financial statements to describe two accounting policies that differ significantly between the U.S. firm(United Continental Holdings, Inc. and Subsidiary Companies) and the foreign firm(China Eastern Airlines Corporation Limited). For each accounting policy, do the differences make IFRS net income higher than, lower than, the same as, or no effect compared to US GAAP net income?

Answer 1

The two accounting policies that differ in 'United continental holdings Inc' are:

- Estimates & Reclassification: This requires the management to make estimates and assumptions which affects the amount and the calculation using Generally Accepted Accounting Principles(GAAP) of United States of America.

- Frequent Flyer Accounting: It is a reward program for customers associated with the company who earns 'miles' by using the services like flight or using partner services associated with the company which includes credit card issue, retail merchants & hotels. The company uses the deferred revenue model for its obligations and redemptions.

The two accounting policies that differ in 'China Eastern Airlines Corporation Limited' are:

- Fixed Assets: Fixed assets in the books of accounts are recognized at cost but later on stated at revalued amount less depreciation. the company revalues its assets every 5 years and accordingly does its accounting.

-Maintenance and overhaul expenses: Major maintenance and overhaul expenses in the company under owned assets are not accrued but still charged under profits and operating profits as and when incurred.