A Major Airline Issues Frequent Flyer Credits That Allow the Passenger

Essay

A major airline issues frequent flyer credits that allow the passenger to receive credit toward future flights.For every ticket sold the customer receives a credit which, when 40 are collected, can be exchanged for a free ticket.During the year, the airline company recorded revenues of $60 million, which represented 100,000 tickets.The airline did not recognize the flyer credits on its income statement or its balance sheet.In the context of contingent liabilities, comment on the airline's accounting procedures.