I have to get this out of my system

I actually did the notes on liabilities and the WHOLE freaking answer was written by ME ME ME.

And I did not put it down. Isn't it as easy as.....

For free transportation – liability = incremental cost

• TIMING is an issue.

Recognise when:

- there is sufficient mileage? OR

- when mileage is accumulated?

If recognise when there is sufficient mileage, that means you assume no liability exists until customer is entitled to a free award

If recognise when mileage is accumulated, that means you view that it is very likely that many customers will accumulate the necessary mileage, so the accumulation of mileage is the obligating event. Hence, you use deferred revenue method, recognise liability for free travel when the original transportation is provided.

• MEASUREMENT is an issue.

Is it:

- Amount of assets consumed in providing free transportation? OR

- Forgone revenue from displacing a paying customer due to free ticket?

Airline industry says that there are restrictions on these free travel awards, so the second option is not relevant. If you choose second option, will, significantly overstate probable future sacrifices.

AcSEC allows both incremental cost and deferred revenue method. Samuelson recommends incremental cost.

There. My. Full. Marks.

Dia is very angry with herself, and she knows it is stupid to think about 201 when she has 213.

Hai. Ok. At least I got it out. Nevermind..........................................