The following are the revenue recognition policies of Flight Centre Ltd as detailed in the company’s 2014 annual report.
Accounting policy
The group recognises revenue when:
• The amount of revenue can be reliably measured
• It is probable that future economic benefits will flow to the entity; and
• Specific requirements have been met for each of the group’s activities.
Revenue is measured at the fair value of the consideration received or receivable. Revenue from the sale of travel services is recognised as set out below.
Revenue from the sale of travel services
Revenue from the sale of travel services is recorded when travel documents are issued, consistent with an agency relationship. Revenue relating to volume incentives is recognised at the amount receivable when annual targets are likely to be achieved. Additional information on other revenue accounting policies is included in note 1(f).
Critical accounting estimates, assumptions and judgments — override revenue
In addition to commission payments, FLT is eligible for override payments from its suppliers, as included in revenue from the provision of travel. These overrides are negotiated with individual suppliers and will typically include a combination of guaranteed payments and volume incentives. The volume incentives are recognised at the amount receivable when annual targets are likely to be achieved. The override revenue accrual process is inherently judgmental and is impacted by factors which are not completely under FLT’s control. These factors include:

• Year-end differences — as supplier contract periods do not always correspond to FLT’s financial year, judgments and estimation techniques are required to determine anticipated future flown revenues over the remaining contract year and the associated override rates applicable to these forecast levels

• Timing — where contracts have not been finalised before the start of the contract period, override and commission earnings may have to be estimated until agreement has been reached; and

• Renegotiations — periodic renegotiations of terms and contractual arrangements with suppliers may result in additional volume/incentives, rebates or other bonuses being received. These payments may not be specified in existing contracts.
Other revenue recognition policies
Lease income: Lease income from operating leases is recognised as income on a straight-line basis over the lease term.
Interest income: Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the instrument’s original effective interest rate, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.
Dividends: Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence.
Royalties: Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Required
a. Identify Flight Centre Ltd’s sources of revenue.
b. In your own words, reconcile the revenue recognition criteria applied by Flight Centre for travel services to the definition and recognition criteria in the Conceptual Framework.