Intermediate Accounting - Airasia

1. INTRODUCTION

AirAsia aspires to create an image of cheap fares, quality service and trustworthy to the public. It has over 110 routes across 13 countries. AirAsia is currently Asia's popular airline with extensive ranges of route connectivity and biggest customer base. Their company tag line, "Now Everyone Can Fly", has made flying economical for more than 61 million guests.

AirAsia focuses on several key issues. In order to guarantee the passenger's safety, it partners with the world's most prominent maintenance providers and complies with world airline operations. To ensure lower costs and higher productivity, AirAsia implements the regions fastest turnaround time at only 25 minutes. Low fare does not compromise AirAsia's quality and services. It has streamlined operations and lean distribution system. In order to continue simple and reduced costs operations, AirAsia applies the point-to-point system.

Adapting to those strategies in its business model, AirAsia has won numerous awards and recognitions. In the budget airline industry, AirAsia keeps improving their understanding and productive leadership by being supportive and flexible in listening to its employee for any ideas to reduce cost. Currently, many low cost airline companies in some countries have adopted the strategies innovated by AirAsia successfully.

AirAsia has been experiencing tremendous growth since 2001 as the biggest and affordable carrier in Asia. It flies to many international destinations with numerous routes and operates over hundreds of flights daily. AirAsia's has subsidiary companies in Thailand and Indonesia. In addition, their hubs in Thailand and Indonesia are located at Suvarnabhumi Airport Soekarno-Hatta International Airport respectively. AirAsia deals with domestic and international flights.

The accounting review of AirAsia is going to be conducted based on its financial statement for the year 2006, 2007, 2008 and 2009.

2. INCOME STATEMENT

2.1 QUALITY OF EARNINGS

Quality of earnings refers to the relevance of earnings in measuring company performance. Its determinants incorporate a company's business environment and its collection and implementation of accounting principles.

For the selection and implementation of accounting principles, AirAsia is expected to adopt the four fundamental accounting principles same as most of the companies which are historical cost, accrual accounting, materiality and conservatism. First of all, accounting systems aim to publish fair and factual information. Since the value of an asset determined through arm's-length bargaining is