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Sample Accounting Issues Memo Essay

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To: Flyaway.com accounting files
From: Student Name
Date: X/X/XXXX
Re: Gross or Net Reporting of Online Ticket Sales Revenues

Flyaway.com (“Flyaway” or the “Company”) sells airline tickets to customers through an online platform, where customers can choose the airline of their choice. Once a customer purchases a ticket, Flyaway remits payment for the travel to the airline and retains a commission (roughly 10% of the ticket’s value). The airlines set all ticket prices. If a flight is canceled, the airline must refund the customer. On the other hand, if the customer’s payment is invalid, Flyaway.com assumes credit risk.
Issue: Should Flyaway.com report its ticket revenue on a gross basis (as a principal) or net (as an agent)?
Flyaway.com (“Flyaway” or the “Company”) must determine whether its ticket sales revenue should be reported gross (for the amount billed to the customer) or net (for the amount retained after remitting customer payments to the airlines). ASC 605–45 (Revenue Recognition—Principal Agent Considerations) addresses transactions and activities including:
15-2(b). Services offered by an entity that will be provided by a third-party service provider.
In this case, since the airline will be providing the actual services (flights) to customers, this arrangement is within the scope of this subtopic.
Presentation guidance within ASC 605–45 states that it is a matter of judgment whether an entity should report revenue on a gross or net basis (par. 45–1). However, the guidance goes on to present eight indicators which may support gross revenue recognition, and three indicators that may support net recognition. We will evaluate these indicators and their application to Flyaway.

Indicators of Gross Reporting
Flyaway has analyzed the indicators of gross reporting in ASC 605–45 and has determined that only one of these indicators is met for its ticket sales arrangements. This indicator is:...

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"Sample Accounting Issues Memo". Anti Essays. 14 Dec. 2018


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Sample Accounting Issues Memo. Anti Essays. Retrieved December 14, 2018, from the World Wide Web: http://parimatch-stavka7.com/free-essays/Sample-Accounting-Issues-Memo-759095.html

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