What is the frequent flyer program liability

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Reference no: EM132795201

Question - Philippine Airlines (PAL) operates a frequent flyer program in which mileage credits are earned by its customers for traveling on the airline. Awards are issued to members at the 25,000 miles level, and all awards expire five years from the date earned. The airline's historical experience indicates that 80% of all travel awards will actually be redeemed.

PAL's liability for free travel at the beginning of 2020 was P28 million. The incremental cost of free travel awards redeemed in 2020 was P19 million. The estimated cost of free travel earned for miles traveled in 2020 are P50 million.

What is the expense that PAL should report for its frequent flyer program in its 2020 income statement?

What is the frequent flyer program liability that PALA should report in its 12/31/20 balance sheet?

Reference no: EM132795201

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