British Airways' performance: using the exit price alternative

Article Abstract:

Cash flow accounting techniques within an exit price framework (known as CaFE accounting in Britain) are applied to the published funds statements within the last five years of annual reports filed by British Airways PLC. CaFE is shown to be more reliable than conventional accounting methods in terms of establishing per-share values for British Airways (a company that is about to be taken public by the British government). Conventional accounting methods have required British Airways to report extraordinary items to account for its managerial policies of paying down corporate debt and restating inventory values to reflect actual realizable values on current markets. The CaFE method minimizes the number of such extraordinary items, while more clearly reporting the company's growth during the 1984-1985 fiscal year and its reductions in long-term liabilities since 1982. When applied to British Airways' annual reports, CaFE states the firm's improvement in profitability since 1981-1982, which peaked in 1984-1985 and deteriorated since 1985-1986, due to lower market values for fixed inventory items (the firm's aircraft fleet) and the less advantageous exchange rates for the British pound sterling.

Methods, Auditing, British Airways PLC, Corporation reports, Company reports

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Accounting for the value of brands

Article Abstract:

The issue of how to account for brand names has recently been in focus. The Companies Act of 1985, along with other rules, give some guidance on how to account for brand names, but no consistent foundation for the valuation of both internally created and purchased brand names is provided. Clear principles for dealing with alterations in brand name valuations reported in financial statements is also not developed. A solution is to use exit prices on corporate balance sheets to provide a coherent foundation for recognition of brand names and other intangibles.

Standards, Accounting, Brand name products, Brand names, Trademarks

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Eurotunnel cash flow projections

Article Abstract:

Analysis is offered of cash flow projections for the Eurotunnel project, whose share issue closed Nov 27, 1987. Units included a share of stock in the British firm Eurotunnel PLC and a matching share from the French firm Eurotunnel SA. Revised cash flow calculations are presented which are free from accruals-based assumptions, which should offer a sharper view of cash flows during the time in which the Eurotunnel can be expected to operate. The Eurotunnel system is supposed to begin operations in May 1993.

Eurotunnel S.A., Public works, Finance, Channel Tunnel, English Channel, Eurotunnel PLC, Water tunnels

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