Assignment Choice #1: The Case of the Airline Industry- When to Recognize Revenue
Consider the earnings process applying to a travel agent and an
airline company and then defend the criteria for recognizing revenue in
each of the two cases.
A travel agent helps a customer purchase an airline ticket and
recognizes revenue for its commission at the point the customer
purchases the ticket. Some argue that revenue recognition is appropriate
because the earnings process of the travel agent—helping the customer
make travel plans and arrangements—is largely completed once the
customer purchases the ticket. What do you think?
In contrast, an airline that provides the same upfront service with
its own in-house sales force cannot recognize revenue for these services
because the airline’s earnings process is incomplete until the flight
itself is provided.
Required: After reading the textbook chapter for
this week on income concepts, discuss the factors to be considered in
determining when revenue should be recognized in measuring the income of
a business enterprise. Discuss the reasons why you believe that revenue
recognition is treated differently under these two different scenarios
with in the airline industry.
Your well-written paper must be 2-3 pages, in addition to title and
reference pages. The paper should be formatted according to the CSU-Global Guide to Writing and APA Requirements (Links to an external site.). Cite at least two peer-reviewed sources, in addition to the required reading for the module.