Pre-Delivery Payment (PDP) — Aircraft on Order
Recording progress payments to an aircraft manufacturer before delivery.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Pre-Delivery Payments (Non-Current Asset) | Asset (+) | 25,000,000.00 | - |
| Cash / Bank | Asset (-) | - | 25,000,000.00 |
💡 Accountant's Note
Pre-delivery payments are progress payments made to Airbus or Boeing during the manufacturing phase of an aircraft order (typically over 24-48 months pre-delivery). PDPs represent a deposit on a future asset — they are carried as a non-current asset (advance payment for PPE) and transferred to aircraft PPE on delivery. PDPs may be financed by PDP loans from financial institutions.
Practitioner & Systems Framework
💻 ERP Architecture
PDPs are tracked by aircraft order line and delivery schedule in the fleet management system. Each payment milestone (PDP1, PDP2, Final) is recorded in the non-current assets section of the balance sheet as an 'advance payment for PPE.' On delivery, the accumulated PDPs plus the final delivery payment are transferred to the aircraft PPE record. If PDP financing is used (a loan against the PDP asset), the PDP asset and PDP loan are recorded simultaneously. Interest on PDP financing may be capitalisable under IAS 23 if the aircraft is a qualifying asset.
⚠️ Audit Flags
Auditors confirm the PDP balance against the manufacturer's payment receipt acknowledgement and the airline's order confirmation. Test that PDPs for aircraft deliveries that have been deferred or cancelled are assessed for impairment or refundability. For cancelled aircraft orders, the PDP refund amount may be less than the PDP paid (cancellation fees) — the shortfall is a loss. Review IAS 23 capitalised borrowing costs on PDP financing. Confirm that PDPs are presented as non-current assets (not prepaid expenses).
📄 Required Documentation
Aircraft purchase agreement (order book, delivery schedule, PDP milestones), manufacturer's payment receipts (PDP1, PDP2, final), PDP financing agreement, IAS 23 borrowing cost capitalisation assessment, impairment assessment for deferred or at-risk deliveries, and PDP-to-PPE transfer at delivery.
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