Revenue Recognition In Airline Industry

Introduction

Revenue is recognizing in a different conditions according to the type of business. The study of revenue recognition will include the concept and scope of sale of goods according to IAS18, revenue recognition from rendering of services, revenue recognition of software companies, the principle of revenue recognition for airline companies, construction contracts, and services concession arrangements. Also the study will contain the customer loyalty programs, agreement for the construction of real estate, agreement for the rendering of services and sale of goods, transfer of assets from customers, exchange of goods and services, Telecommunication Company selling talk time, magazine subscription, and recognition for Media Company.

Basically, for the service concession arrangements, there are two specified criteria. The first is the timing of the agreement recognition. The second is the measurement of the recognition carrying value. The first concept in the timing of the recognition is the consideration of the construction as an asset. Meaning to say, the property would be complete when the construction is ready to be used. The time may be determined before the finishing of the construction. For example, if the owner had almost build a building and still have one month to be ready for renting; the owner would assume it as an asset and start advertising of renting the apartments. As for the recognizing of the property, it is recognized when one of the two conditions is existed. The first would be when the property is beneficial to the economy in the early future; and the second is when the fair value of the property, that is considered an asset, is reliably measured. There must be a disclosure of several; aspects in each period of the arrangement. At the start, there should be a description regarding the arrangement. Then, there should be a consideration of the arrangement’s terms that may influence the future flow of the cash. Afterwards, an extent of all followed aspects should be clearly provided. Adding to that, the possible changes of the arrangement during its operation must

This complication is relied on the agreement established between them and the buyer. According to real estate main services, they either construct new residential properties or managing them. In the case of renting them, the revenue recognition is normally accumulated in accordance to the GAAP. But in the case of construction, there would be two types of contracts, the first is when the agreement meets the construction design, and the second is the limited ability contracts. For the first type, the customer may change the design of the construction required by any time after starting the operation. Under this type, the revenue is recognized periodically. This means, with every change, the revenue is newly recognized. In case of the limited ability contract, the customer would have almost no influence on the design or requirements of the construction. For example, a customer approaches a real estate company to build and manage a suitable residency of four villas. The company would construct the design, determine the requirements, and start preceding the work after the acceptance of the customer. Afterwards, the customer would have no capability to cause any changes on the construction. In this case the revenue recognition would be analyzed as a selling of good. This recognition is obtained after the fulfilling of selling the goods to the customer (Dylag & Kucharczyk,