3.2.2 Assess the Company’s Accounting Flexibility
Qantas is not flexible in impairment generally, especially for non-financial assets. The recoverable amount of assets is depending on the higher of the fair value less costs to sell and value in use. Consequently, the appropriate impairment charge could be less as the carrying amount of an asset or cash generating unit is lesslikely exceeds its recoverable amount. In addition, an impairment loss with respect to goodwill is not reversed, which could lead to an inaccurate value of goodwill. However, Qantas has rights to reverse the impairment loss (except for goodwill) if there has been a change in the estimates used to determine the recoverable amount, which could be regarded as flexibility.
When considering depreciation policy, managers have very little accounting discretion and are forced to use straight line basis on all items of property, plant and equipment except for freehold land which is not depreciated. Assets are depreciated from the date of acquisition or from the time an asset is completed and available for use if generated internally. The costs of improvements to assets are also depreciated over the short horizon of remaining useful life or the estimated useful life of the improvement. Therefore, this depreciation method could smooth the annual depreciation expenses.
In the context of goodwill, Qantas have become more flexible in measuring goodwill when a company acquires it since moved to IFRS. Before that, goodwill acquired is on the basis of deemed cost. After joining IFRS, goodwill acquired is required to use fair values. This could give a more accurate value in the acquisition of goodwill, which is more informative to investors.
3.2.3 Evaluate the Company’s Accounting Strategy
Since 1 January 2010, the estimated residual values have been changed from between nil and 20 per cent to between nil