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. Read Notes 4.6 and the Consolidated Balance Sheet. What do you think gave rise to deferred revenue on ticket sales of €3,289 as of the end of fiscal 2019? Would transactions of this type be handled similarly under U.S. GAAP?
2. Is the threshold for recognizing a provision under IFRS different than it is under U.S. GAAP? Explain.
3. Note 30 lists “Return obligation liability and provision for leased aircraft and other provisions” (hereafter, “other provisions”).
a. Do the beginning and ending balances of other provisions shown in Note 30 for fiscal 2019 tie to the balance sheet? By how much has the total amount of the AF’s “other provisions” increased or decreased during fiscal 2019?
b. Prepare journal entries for the following changes in the litigation provision that occurred during fiscal 2019, assuming any amounts recorded on the income statement are recorded as “provision expense,” and any use of provision is paid for in cash. In each case, provide a brief explanation of the event your journal entry is capturing.
i. New provision
ii. Use of provision
iii. Reversal of unnecessary provisions
c. Is AF’s treatment of its litigation provision under IFRS similar to how it would be treated under U.S. GAAP?
4. Note 30.2 lists a number of contingent liabilities. Are amounts for those items recognized as a liability on AF’s balance sheet? Explain.