British Airways, Plc. (BA), a U.K. company, prepares its financial statements according to International Financial Reporting Standards. BA's annual report for the year ended March 31, 2009, which includes financial statements and disclosure notes, is included with all new textbooks and can be found at www.britishairways.com. When answering questions, focus on BA's "Group" financial information (which is equivalent to "Consolidated" under U.S. GAAP).
Required:
1. In Note 2: Summary of significant accounting policies, part d: Leased and hire purchase assets, BA states that "Where assets are financed through finance leases or hire purchase arrangements, under which substantially all the risks and rewards of ownership are transferred to the Group, the assets are treated as if they had been purchased outright." Is this the policy companies using U.S. GAAP follow in accounting for capital leases? Explain.
2. Look at BA's Note 28: Long-term borrowings and Note 29: Operating lease commitments. Does BA obtain use of its aircraft more using operating leases or finance leases? Do lessees report operating and finance lease commitments the same way? Explain.