current year using lease agreements B u s i n e s s F i n a n c e

All the information is listed in the attached document but these are the questions that need to be answered.

The 2 airlines that I am assigned and you will be working on are Hawaiian Airlines(US Airline), and Ryanair(IFRS Airline)

QUESTIONS

1- Differentiate between an operating lease and a capital/ financing Lease for GAAP financial
reporting purposes.

2- Under GAAP, has this been treated as a capital lease / financing Lease for Ark or an operating
lease?

3- Under IFRS, should this lease be classified as an operating or a financing lease?

4- Describe the different reporting results between GAAP and IFRS and review the necessary
adjusting entries to conform the financial statements to IFRS compliance for Year 1 (see below).

5- Prepare an income statement under IFRS for year 1. Assume that the net income remains the same
under IFRS as it does for GAAP and any difference is reconciled in the tax expense and tax payable
accounts.

6- Prepare balance sheet under IFRS for Year 1.

7- Compute the following ratios for Year 1, under both IFRS and GAAP reported totals. Comment on
your findings.
a. Current Ratio
b. Quick Ratio
c. Cash Ratio
d. Times Interest Earned
e. Debt to Capital Ratio
f. Debt to Shareholder Equity Ratio

8. Find the financial statements for the two airlines your team has been assigned (see last page)
and answer the following questions:
a. What assets (and amounts) do the airlines disclose that they lease (include a screenshot)?
b. What is the amount of the current and long-term liability related to the leases shown in the
balance sheet?
c. Is there anything shown in the income statement related to leases? If so, what and how
much?
d. In the statement of cash flows, what amount is reported as outflows related to leases? What
section is it presented in?
e. Review the notes to the financial statements and identify what was acquired in the current
year using lease agreements. What were the assets and their value?
f. What amount of principal was paid on these new leases in the current year?