In the first instance, the relation of the first scenario concerns a travel agent helping in the purchase of an airline ticket and commission charged for service provision or assisting the creation of travel arrangements and plan. Considering the case, the charges on the commission at the point of ticket purchase, the consideration made is on revenue recognition and the earning process (Schroeder, Clark & Cathey, 2013). The scenario is so since the travel agent makes a commission charge of the customers based on service provision or assisting in the creation of the travel plan.
Regarding the airline company, charges on the commission by the travel agent on behalf of the services provided or helping in travel plan creation and arrangements are considered revenue recognition (Kieso, Weygandt & Warfield, 2010). If there are no provisions of additional services by the travel agent, helping and showing support for the arrangements and the travel plan, then the situation of the commission at the purchases point is regarded ineffective towards recognizing revenue. Considering the travel agent’s context, the principal factors are customer's service provision, help to make travel plans and arrangements about the planning travels in measuring the airline's income.
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In the second case, the airline offers similar upfront services with its salesforce. Here, the earning process of the airline is based on travel services or flights that the customers offer. However, the salesforce’s upfront service cannot be regarded as revenue reorganization (Schroeder, Clark & Cathey, 2013). Similarly, there is the provision of the same services by the airline as the agent with their own-in-house to increase or force revenue sales. Hence, it cannot be regarded as revenue recognition since there is no income generation for the main operations or services.
Moreover, the second case considers factors such as the income or revenue process generation as the travels or the flights are found when doing revenue determination in incomes for the airline company. Under the same scenario, treatment of revenue is different as both cases are different. Nonetheless, the first case is based on travel agent while the second is on own-in-house. Thus, the services are taken to be the income process, or revenue recognized (Kieso, Weygandt & Warfield, 2010). In addition, the similar services for encouraging sales cannot be regarded as income process.
Following the above discussion, it is forecasted that the services provision purpose is significantly different since one is based on sales and the other on encouraging sales. Hence, the treatment of the revenue recognition is different.
References
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2010). Intermediate accounting: IFRS edition (Vol. 2). John Wiley & Sons.
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2013). Financial reporting disclosures and ethical responsibilities. Financial accounting theory and analysis: Text and cases.
