ScottB wrote:coronado wrote:Keep in mind that under IFRS16 if the 7 A350's and 2 B739 are booked as operating leases, these are now treated essentially the same as financial leases and regular debt financing in the sense that everything is now reported on Delta's balance sheet.
If IFRS were applicable to U.S. companies, this would be true, but it's not. Delta has to comply with GAAP, not IFRS.
Prost wrote:How feasible would it be to outfit a handful of A350s in a domestic configuration with Premium Select as a domestic FC cabin. Comfort + and Coach? All with the understanding that when international ramps up the Premium Select section in the nose section gets replaced with the Delta One cabin?
It'd make sense if they felt the recovery in international markets would take several years. If most long-haul traffic has returned by 2023 it's probably not worthwhile to go through the expense of reconfiguration twice. They're probably just better-off accepting the capacity hit and still operating them domestic if they need the seats.
GAAP and IFRS treatments are essentially immaterial for purposes of Delta and other US airlines in so far as the treatment of leases if used for acquiring aircraft.. Leases are now on the balance sheet even if GAAP distinguishes between operating leases and financial leases, both are now on the balance sheet. The impact on Delta was to increase assets and liabilities by $6bn. After this adjustment date new leases for aircraft are included in the balance sheet rather than as an off balance sheet item.
This was the impact on Delta and the timing when they recognized these leases on their balance sheet:
https://www.cfainstitute.org/-/media/do ... paper.ashxLeases: What Investors Need to Know About the New Standard 38
Delta and American Airlines
As this document was going to print, Delta Airlines
released its 2018 Form 10-K adopting ASC Topic 842
early. Delta adopted the leasing standard in the fourth
quarter 2018 effective 1 January 2018, waiting until the FASB released their modification that allowed prior years not to be restated. Its prior 2018 quarters were restated. The
results are included in Note 8 to the Delta 2018 Form 10-K7 and highlight a $6 billion
increase in assets (10%) and liabilities (15%) with a small adjustment to equity.
American Airlines followed suit releasing its 2018 Form 10-K8, adopting the
leasing standard early – in the fourth
quarter 2018, after the FASB reprieve –
effective 1 January 2018. The impact to the financials was an approximately $9 billion
increase in assets (15%) and liabilities (15%) with a positive impact to equity of $200 million
(100% increase in equity).