Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2019, are available in Connect. This material is also available under the Finance link at the company’s website (www.airfranceklm.com).

Required:
1. In note 4.6, AF indicates that “Sales related to air transportation, which consist of passenger and freight transportation, are recognized when the transportation service is provided,” so passenger and freight tickets “are consequently recorded as ‘Deferred revenue upon issuance date.’ ”
a. Examine AF’s balance sheet. What is the total amount of deferred revenue on ticket sales as of December 31, 2019?
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. Assume that AF is forced to cancel a flight due to mechanical trouble, requiring it to promise €50,000 of compensation to affected passengers. Prepare the journal entry that AF would make to record this event.
3. AF has a frequent flyer program (also called a “loyalty program”), “Flying Blue,” which allows members to acquire “miles” as they fly on AF or partner airlines that are redeemable for free flights or other benefits.
a. Does AF treat “Miles” as a separate performance obligation?
b. Does AF report any liability associated with these miles as of December 31, 2019?
c. Is AF’s accounting for its frequent flier program consistent with IFRS 15?