Air France-KLM (AF) , a French company, prepares its financial statements according to International Financial Reporting Standards. AF's annual report for the year ended March 31, 2011, which includes financial statements and disclosure notes, is provided with all new textbooks. This material also is included in AF's "Registration Document 2010-11," dated June 15, 2011 and is available at www.airfranceklm.com.

Required:

1. In note 3.6, AF indicates that "Upon issuance, both passenger and cargo tickets are recorded as "Deferred revenue on ticket sales" and that "Sales related to air transportation are recognized when the transportation service is provided."

a. Examine AF's balance sheet. What is the total amount of deferred revenue on ticket sales as of March 31, 2011?

b. When transportation services are provided with respect to the deferred revenue on ticket sales, what journal entry would AF make to reduce deferred revenue?

c. Does AF's treatment of deferred revenue under IFRS appear consistent with how these transactions would be handled under U.S. GAAP? Explain.

2. AF has a frequent flyer program, "Flying Blue," which allows members to acquire "miles" as they fly on Air France or partner airlines that are redeemable for free flights or other benefits.

a. How does AF account for these miles?

b. Does AF report any liability associated with these miles as of March 31, 2011?

c. Is AF's accounting approach under IFRS consistent with how U.S. GAAP accounts for multiple deliverable contracts? Explain.