Singapore Airlines Ltd. is one of the world's most successful airlines. An excerpt from the notes to
Question:
Singapore Airlines Ltd. is one of the world's most successful airlines. An excerpt from the notes to this company's financial statements appears below.
SINGAPORE AIRLINES LIMITED
Notes to the Financial Statements
Passenger sales are recognized as operating revenue when the transportation is provided. The value of unused tickets is included as sales in advance of carriage on the statement of financial position and recognized as revenue at the end of two years.
The Company operates a frequent flyer program called "KrisFlyer" that provides travel awards to program members based on accumulated mileage. A portion of passenger revenue attributable to the award of frequent flyer benefits is deferred until they are utilized.
Cargo sales are recognized as operating revenue when the transportation is provided. The value of unused air waybills is included in current liabilities as sales in advance of carriage. The value of tickets and air waybills are recognized as revenue if unused after two years and one year, respectively.
Instructions
(a) When does this airline recognize the revenue from its ticket sales? From its cargo services? From its frequent flyer rewards?
(b) Does the timing of the receipt of cash from the sale of tickets have any effect on the recording of expenses for delivering the air transportation?
(c) When an airline ticket is sold, a portion of the price relates to future frequent flyer benefits. How is this portion recorded?
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine