Air France-KLM“Financial Statements 2014 Air France

Air France-KLM“Financial Statements 2014 Air France Air France-KLM is a Franco-Dutch airline seated in France. You can find the “Annual financial report 2014” with the financial statements for 2014 at: http://www.airfranceklm.com/sites/default/files/publications/annual_financial_report_2014_- _air_france-klm.pdf Please discuss the following questions related to the information included in the financial report on the first 101 pages. Please always indicate the relevant pages in the financial statements connected to your answers. 1. What is the difference between the two sets of financial statements, one included on pages 3-18 and the other on pages 19 -101, concerning the entities covered? 2. What is the reason for having those two sets of financial statements? What might be the different purposes of the two sets? 3. What is the difference concerning the accounting standards used for the two sets? 4. What does the expression “International Financial Reporting Standards (IFRS) as adopted by the European Union (EU)” mean (see para. 4.1.1. on page 29)? Please explain the reason for this expression. 5. Would the SEC accept the financial statements on pages 19 et seqq. without reconciliation to U.S. GAAP if the company wanted to enter the U.S. capital market and file with the SEC? 6. Look at the formats of the balance sheets of the two different financial statements. a. In which respects are they different? What might be the reason for the difference? b. In which respect is the balance sheet format of the balance sheet on page 22/23 different to one that would have been presented under U.S. GAAP? 7. How does the IFRSs define the difference between current and non-current assets? 8. Look at the income statement on pages 20/21: a. Does it follow the so called “one statement approach” or the “two statement approach”? b. What is the name of the format Air France uses to present the expenses? c. How does this format differ from the one that would need to be used under U.S. GAAP? d. Which of the income figures tells you whether the entity has been profitable with its core business activities. What was this income figure for 2014? e. What is meant by the expression “Total of other comprehensive income that will be ??reclassified to profit or loss” in the statement on p. 21? ?Please turn the page! 9. Return on Equity Ratio a. Please calculate the Return on Equity Ratio of the years 2014 and 2013 on the basis of the financial statements of pages 19 et seqq.. b. If you compared this ratio with the one of an airline seated in the U.S.A. and listed at the NYSE, what might be the major challenges that you should be aware of? 10. Non-current assets held for sale: a. Explain the general treatment of non-current assets held for sale under IFRS. b. What is the amount of such assets in the financial statements of pages 19 et seqq. for the years 2014 and 2013? c. What are the events/transactions behind these figures? 11. Intangible Assets: a. What are the two major categories of intangible assets of the Air France group? b. How much did the group amortize of its total amount of intangible assets? c. In general, what are the two major differences between IFRS and U.S. GAAP with regard to the accounting of intangible assets? 12. Revaluation Method: a. Please explain the general construct of the revaluation method under IFRS! b. Does this method influence the net income in a different way than the historical cost method? c. May this method be applied for intangible assets? d. Do you find any indications in the financial statements of pages 19 et seqq. that the revaluation method might have been applied for particular assets? 13. Air France is seated in France. What might traditionally be the characteristics of the cultural factors that generally have influenced the domestic accounting system of Air France? How does the last sentence in Para. 1 of the notes on page 8 correspond with these factors? 14. Application of IFRS in the EU: a. Under which circumstances the application of IFRS is required in the European Union? b. Under which circumstances entities have an option to apply IFRS in the European Union? ACCT 8087 001 Spring 2016 Homework Case Study „Air France - KLM“ Financial Statements 2014 Air France - KLM is a Franco - Dutch airline seated in France. You can find the “Annual financial report 2014” with the financial statements for 2014 at: http://www.airfranceklm.com/sites/default/files/publications/annual_financial_report_2014_ - _air_france - klm.pdf Please discuss the f ollowing questions related to the information included in the finan cial report on the first 101 page s . Please always indicate the relevant pages in the financial statements connected to your answers. 1. What is the difference between the two sets of financial statements, one included on pages 3 - 18 and the other on pages 19 - 101 , concerning the entities covered? 2. What is the reason for having those two sets of financial statements? What might be the different purposes of the two sets ? 3. What is the diff erence co nce rning the accounting standards used for the two sets ? 4. What does the expression “ International Finan cial Reporting Standards (IFRS ) as ado pted by the European Union (EU )” mean (see para. 4.1.1. on page 29)? Please explain the reason for this ex pression. 5. Would the SEC accept the f inancial statements on pages 19 et seqq. witho ut reconciliation to U.S. GAAP if the company wanted to enter the U.S. capital market and file with the SEC? 6. Look at the format s of the balance sheet s of the two different financial statements. a. In which respects are they different? What might be the reason for the difference? b. In which respect is the balance sheet format of the balance sheet on page 22/23 different to one that would have be en presented under U.S. GAAP ? 7. How does the IFRS s define the difference between current and non - current assets? 8. Look at the income statement on pages 20/21: a. Does it follow the so called “one statement approach” or the “two statement approach”? b. What is th e name of t he format Air France uses to present the expenses? c. How does this format differ from the one that would need to be used under U.S. GAAP? d. W hich of the income figures tells you whether the entity has been profitable with its core business activities. What w as this income figure for 2014? e. What is meant by the expression “ Total of other comprehensive income that will be reclassified to profit or loss ” i n the statement on p. 21? Please turn the page! 9. Return on Equity Ratio a. Please calculate the Return on Equity Ratio of the years 2014 and 2013 on the basis of the financial statements of pages 19 et seqq.. b. If you compared this ratio with the one of an airline seated in the U.S.A. and listed at the NYSE, what might be the major challenges that you should be aware of? 10. Non - current a ssets held for sale: a. Explain the general treatment of non - current assets held for sale under IFRS. b. What is the amount of such assets in the financial statements of page s 19 et seqq. for the years 2014 and 2013? c. What are the events /transactions behind these figures? 11. Intangible Assets: a. What are the two major categories of intangible assets of the Air France group? b. How much did the group amortize of its total amount of intangible assets? c. In general, w hat are the two major difference s between IFRS and U.S. GAAP with regard to the accounting of intangible assets? 12. Revaluation Method: a. Please explain the general construct of the revaluation method under IFRS! b. Does this method influence the net income in a different way than the historica l cost method? c. May this method be applied for intangible assets? d. Do you find any indications in the financial statements of pages 19 et seqq. that the revaluation method might have been applied for particular assets? 13. Air France is seated in France. What might traditionally be the characteristics of the cultural factors that generally have influenced the domestic accounting system of Air France? How does the last sentence in Para. 1 of the notes on page 8 correspond wit h these factors? 14. Application of IFRS in the EU: a. Under which circumstances the application of IFRS is required in the European Union ? b. Under which circumstances entities have an option to apply IFRS in the European Union ? This homework is due on Saturday, January 30! Please print your solution to the homework out on paper having your name and student number on it , and bring it to class !