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Frequent Flyer Accounting

Introduction

Frequent flyer loyalty programs are a valuable marketing tool for airlines, however accounting for frequent flyer points (FFPs) is not a straight forward process (Bowman 1995). The aim of this assignment is to examine the concept of how FFPs should be accounted for according to the Framework, compare how Qantas Airways Limited (Qantas) and Virgin Blue Holdings Limited (Virgin) account for FFP's, and determine the potential consequences of different accounting treatments.

Accounting procedure for frequent flyer points according to the principles of the Framework

The major accounting issue with FFPs is how an airline accounts for their economic value (Bowman 1995). Although FFPs have a relatively low estimated value of between US$0.01 and US$0.10 each, the large number of kilometres flown by a multitude or airline customer's means that to any one airline FFPs can represent a significant liability (WebFlyer 2006).

Because FFPs represent a present obligation......


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Approximate Word Count: 1246
Approximate Pages: 5 (250 words per double-spaced page)

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