Additional_Disclosure_Ch18_Examples_of_Revenue_Recognition_Policies

Additional_Disclosure_Ch18_Examples_of_Revenue_Recognition_Policies

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Chapter 18- Revenue Recognition Disclosures SOUTHWEST AIRLINES CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Tickets sold are initially deferred as “Air traffic liability”. Passenger revenue is recognized when transportation is provided. “Air traffic liability” primarily represents tickets sold for future travel dates and estimated refunds and exchanges of tickets sold for past travel dates. The majority of the Company’s tickets sold are nonrefundable. Tickets that are sold but not flown on the travel date can be reused for another flight, up to a year from the date of sale, or refunded (if the ticket is refundable). A small percentage of tickets (or partial tickets) expire unused. The Company estimates the amount of future refunds and exchanges, net of forfeitures, for all unused tickets once the flight date has passed. These estimates are based on historical experience over many years. The Company and members of the airline industry have consistently applied this accounting method to estimate revenue from forfeited tickets at the date travel is provided. Estimated future refunds and exchanges included in the air traffic liability account are constantly evaluated based on subsequent refund and exchange activity to validate the accuracy of the
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This note was uploaded on 05/05/2008 for the course BUS 302 taught by Professor Katherine during the Spring '08 term at Rhode Island.

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Additional_Disclosure_Ch18_Examples_of_Revenue_Recognition_Policies

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