Assignment 4
Case 7.2 Revenue Recognition Associated with Frequent Flier Miles
Continental Airlines: Revenue is deferred and recognized when transportation is provided
• Revenue is realized, and earned. The carrier has performed its duty, the service has been preformed. The amount of the claim is known
AMR (American): Revenue is deferred and recognized over the period approximating mileage credits are used
• Because there is no actual way of knowing when/if mileage will be used, it is not appropriate. Revenue may have not been earned at time of recognition.
UAL (United): Revenue is recognized when the credits are sold
• Revenue has been realized, but not yet earned as the service has not been provided
Delta Airlines: Revenue is recognized as operating revenue at time of sale
• This is not part of operating revenue as it is not the primary line of business.
• At time of sale, revenue is realized but has not been earned yet
US Airways Group: Revenue is recognized as other operating revenue when credits are sold
• It is better to place this revenue under other operating revenues
• When credit is sold, revenue has been realized, but not yet earned.
Case 7.3 Restatement of Xerox Revenue
a.) 2001 2000 1999 1998 1997
Leases
Total 3.07% 0.27% -2.92% -4.16% -4.21%
b.) 2001 2000& ...