Laiza Joyce H.

Sales – BS Accountancy 4

I.

Specialized industries have significant differences with regards to their financial reporting compared to the
common industries due to the nature of their operations. I have expected to see major differences right away on the
Statement of Financial Position of the 2014 Audited Financial Statements of Cebu Air Inc. and Subsidiaries.
However, I was surprised that there are no different account titles in their Balance Sheet except the “ Expendable
parts, fuel, materials and supplies”, unlike in that of the banks we previously reviewed wherein most account titles are
different. The new account titles were mostly seen on the Statement of Comprehensive Income and Statement of
Cash Flows instead.

I have noticed that the majority of the assets of Cebu Air Inc. are under their Property, Plant, and Equipment
which is almost 86% of all the assets. Whereas, their total current assets is just 10% of all the assets, therefore the
liquidity of the company is rather low especially when considering that their current liabilities are almost thrice the
amount of their current assets. On the other hand, the company makes use of all their PPE as they have reported
that they have no temporary idle property and equipment. Lastly, I have noted that in their Financial Statements, the
disclosure of their Depreciation and Amortization is combined with the Notes of the PPE. I think it is due to the large
number of PPE. However, it resulted to short information about the depreciation and amortization wherein the
amount is merely stated for each component of PPE while the component of the depreciation and amortization itself
(such as useful life) is not indicated.

By observing their Audited FS, I have discovered that airlines do not own all of the aircrafts they are using.
Cebu Air actually leases seven (7) of their aircrafts from Inishcrean Leasing Ltd. which is from Ireland. Also, I have
noticed that because Cebu Air is an international airline and transacts with other countries, it is greatly exposed with
foreign currency risk seeing as 29% of its revenues and 67.2% of its capital expenditures are denominated in foreign
currencies. In its Consolidated Statement of Comprehensive Income, you can see that the company incurred
127,471,032.00 with the foreign exchange losses.

II.

I have searched for the Audited Financial Statements of Philippine Airlines which is under PAL Holdings,
Inc. However, I am not able to get a copy of their 2014 Audited FS as it is no longer available online. Thus, I am
going to compare the 2014 Audited Financial Statements of Cebu Air Inc. with the 2020 Audited Financial Statements
of PAL Holdings, Inc. Through the 6 year gaps, we will be able to notice whether there are significant changes with
the financial reporting between these 2 periods.

First of all, both companies are audited by the same auditing firm which is the SGV Auditing Firm. In the
introduction of the auditor’s report, PAL Holdings, Inc. differed from Cebu Air Inc. as the auditing firm first took into
account the issued with the going concern assumption of PAL as it is the year wherein the pandemic took place. In
the next part of the auditor’s report of Cebu Air Inc., the auditor stated the auditor’s responsibility and simply stated
his opinion right after. However, on the PAL Holdings, Inc., a broader analysis was made for their opinion. After
stating her opinion, the auditor also reiterated her basis for her opinion, Material Uncertainty Related to Going
Concern, Responsibilities of Management and Those Charged with Governance for the 2019 Consolidated Financial
Statements, and Auditor’s Responsibilities for the Audit of the 2019 Consolidated Financial Statement.
 Just like what I have said previously about Cebu Air Inc., most of the assets of PAL Holdings Inc. are under
its Property, Plant, and Equipment, which is 76% of the total assets of the company. Likewise, PAL’s current assets
are just 14% of the total assets while its current liabilities are more than 600% of the current assets. With regards to
their account titles, they are similar with that of Cebu Air. However, due to the pandemic, PAL has suffered more than
P73 MILLION losses. Lastly, just like Cebu Air, it presented its Depreciation and Amortization together with its PPE in
the disclosure in the Notes to Financial Statements.

Currently, in the year 2021, Philippine Airlines has already filed for bankruptcy as it has incurred billions of
losses due to the pandemic. As its PPE comprises most of its assets, the company tried to lessen their expenses
relating to it and liquidate the same by returning the aircrafts they have leased from other companies. However, the
company has not yet decided to sell their aircrafts as it believes that the company will be able to recover from their
losses in the future. On the other hand, Cebu Air Inc. continuously offers transport services in the country.