Component depreciation in airline companies -A study about harmonization of accounting

Sammanfattning: Background and problem discussion: IASB is the organization that develops and publishes IFRS-regulations which is used in more than 100 countries across the world. One of IASB´s objectives is to harmonize accounting between countries in order to make international accounting information comparable (www.ifrs.com). IFRS is a principle-based system, which means that there are no clear guidelines of how accounting should be managed, and therefore companies have to do estimations about their accounting. This creates problems because harmonization is impaired due to the fact that there are other factors, such as firm- and country-related factors that control accounting decisions instead of the economic situation (Sorderstrom et. al. 2007). IAS 16 is a standard that requires complex estimations, such as what value a part should have to be regarded significant and to be depreciated separately. An industry, where component depreciation is common and these problems relevant are the airline industry. In spite of the fact that this industry is homogenous and companies should account in a similar way, the difficulties can lead to that component depreciation is used differently. Purpose: The purpose of this thesis is to determine if IASB´s objective of harmonization is fulfilled for component depreciation in the investigated passenger airline companies. Limitations: This thesis is limited to passenger airline companies that are using IFRS. The companies are public and their annual reports are taken from the fiscal year of 2010. Methodology: This thesis is based on a quantitative study that includes companies from all over the world. A multiple regression model and a Kruskal-Wallis test were used to recognize the statistical relationships between the investigated variables. Conclusions: The result from the empirical data indicates that IASB´s objective of harmonization is not fulfilled for component depreciation in the investigated airline companies because there are other factors than economical that control their use of it. It also suggests that accounting quality does not generally differ between companies depending on the extent in which they use component depreciation. Therefore, the usability of accounting information is not impaired in spite of the fact that the objective of harmonization is not fulfilled for component depreciation. Suggestions for further research: A suggestion for further research is to investigate what value a significant components has on average in relation to the whole asset. Another suggestion is to do a qualitative study about how companies reasons in their choice of using component depreciation and how they interpret IAS 16 p. 43, component depreciation.