I don't think it's yet clear that 1Time's depreciation and revaluaton approach isn't correct in terms of IAS16. More on this later, but first let me consider a couple of points relating to IAS16. 1. The revaluation surplus (when the company revalues the 'planes upwards) should not go through earnings. (Except where the plane was previously revalued downwards. Revaluation downwards does go through earnings, unless it reduces a previous revaluation upwards). The difference goes through the statement of changes in equity. Now for 1Time, there is a revaluation surplus in the statement of changes in equity, so it looks as if they're probably not completely getting this wrong after all. 2. IAS16 requires depreciation over the useful life whether the cost or fair value approach is adopted. However, only depreciation down to its residual value. Also, depreciation "stops" when the carrying cost gets to the current fair value. Thus, it isn't simply a question of depreciating of 10 years meaning 10% of asset value per year. The residual value comes into this as well. (Depreciation is straight-line as disclosed in the prospectus. You *have* read the prospectus, right?) So, it's not clear that they've got these numbers wrong. What they do seem to have "got wrong" is the careful disclosure requirements of IAS16, which requires them to disclose important estimates used in calculating the depreciation, and the details of how (and who) did the revaluation. We really should have enough information to come pretty close to replicating such an important component of the costs for an airline. There is no option here. IAS16 requires it. So from my perspective, the fact that it isn't clear what they've done is a problem. Mr Topol is very right in his questions - we shouldn't have to guess and hope that it's all above board. One last point on the age of the FD. I don't think anyone has a problem with his age. The potential problem is with his experience. Working for less than 4 years, and just completed his articles at an audit firm that, while well-known and respectable, doesn't have the same cachet as one of the Big Four - I think it is fair that potential investors and current shareholders at least consider whether this is appropriate background and experience for such an important role in looking after shareholder money and reporting financial performance to shareholders. Well done Mr Topol, best of luck 1Time - but can we look forward to award-winning financial statements next time where full and useful disclosure is considered a point of pride for the company?
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