Microsoft Word - Assignment ACCG8142 S2 2020.docx ACCG8142 research assignment – due 29 September 2020 Indications of impairment...

ACCG8142 RESEARCH ASSIGNMENT
Table of Contents
Introduction    3
1. Source of Risk to the Company    3
2. Financial Effects on Qantas Airlines from Global and Local Recessions    4
Assumptions    5
Accounting Policies    6
3. Critical Review of Identified Impairment and Forecast Analysis    7
Conclusion    9
References    10
Introduction
Qantas is known as the world’s leading long-haul airways founded in Queensland in 1920, becoming the world's second-oldest airlines. Today, with nearly 35,000 staff, the airways provide flight services through a network of 173 destinations in 42 countries worldwide. Qantas provides a wide a
ay of goods and services like luxury
and, Qantas and Jetstar, a low cost
and. Qantas
eak in on domestic and international flights.
Qantas provides first, business, luxury economy and economic class in terms of international flights, which passengers enjoy various cabin, dining and amenity collection facilities as they pay. The coronavirus disease out
eak has forced Australia’s flagship airline, Qantas, to announce perhaps the worst financial performance for a century – a loss of $3 billion – despite massive tourism and travel destruction.
1. Source of Risk to the Company
Qantas faces many wo
ies on the market that the company as losing cash while most of its aircraft remains grounded. The company has confirmed that it remains a problem and its chief executive, Alan Joyce, has taken a dig at a struggling competitor Virgin Australia by announcing that Qantas will be "the only Australian airline capable of flying long distances after the crisis." The aviation industry is in free fall as travel restrictions cause a substantial decline in traffic volumes and rapid-time revenues.
The airlines that incorporate air cargo within their "available seat miles" (or kilometres) the business strategy could benefit marginally if supply chains and consumer demands return. As stated by Shibata (2020), during the crisis, airlines, which support the growth of the e-commerce sector, which actually generate cargo profit during the crisis. Ca
iers from around world have flight cancellations and planned for their first zero-dollar revenue days in aviation history and the resulting pause in cash inflows in response to the crisis and social distancing. Most airlines including Qantas have enough short-term liquidity to withstand the next three months, considering the unexpected revenue drop.
Some airlines have gone bankrupt but policymakers are also standing in and offering financial help to keep airlines afloat. However, the picture over the long term expresses concern. Qantas Airlines will not resume normal operational activities and demand levels until 2022 at the earliest and whenever they do; COVID-19 will change forever in a world. That means 2020 will be a fine balance as Qantas Airlines concu
ently attempt to stabilise their company while getting ready for rehabilitation in demand. The major financial risks of Qantas Airlines include rate of interest, exchange risk of cu
ency and fuel-price risk.
The first source of risk is the geopolitical and economic instability, the second source of risk is management of the supply chain, third is domestic and international competition of Qantas Airlines. Ability to perform key contracts is the next source of risk as multimillion-dollar deals and strict timelines have large backlogs. Inability to execute on major initiatives will result in substantial negative consequences for both financial results and
and value. Cu
ency exchange rate fluctuations are final type of risk confronting the aviation sector. Indicate that a large number of airlines as Qantas Airlines operate globally, a significant proportion of their income streams are earned in a wide range of exchange rates, leaving them prone to cu
ency exchange rate fluctuations.
2. Financial Effects on Qantas Airlines from Global and Local Recessions
Australian border is to stay closed, for visitors at least, until July of 2021. Even with the reopening of that boundary, company expects the number of international flights in 2021-22 to be mostly half of what they have been before the coronavirus pandemic and just up to 2-thirds the cu
ent accounting year. As mentioned by Borio, Drehmann and Xia (2018), recessions are times of particular economic decline and economic performance metrics such as income inequality, unemployment and Budget deficit.
Because of tightening credit conditions, sluggish demand and general fear and confusion, recessions have an effect on all types of businesses, large and small. A tightening of credit conditions appears to be one of the first effects recessions have on companies. Interest rates may initially rise early in the recession, then fall as the financial flood gates opened, but market-lending standards tend to be tighter throughout the recession and lenders are more selective of the risks they are willing to take on at any rate. Qantas Airlines faces difficulties in repaying their debt, most of which are reliant on the continuing operations being financed.
Consumer bonds relative to the growth of the market has successively reached higher peaks of record decade after decade leading to the very last several financial crises. As decreasing revenues appear on its quarterly earnings report, stock price...