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© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
AirlinesIFRS 15 Revenue – Are you good t...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Areyougoodtogo?
2
IFRS 15 will change th...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
3
For each of the following,
documenting...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Ticketbreakage
4
How will ticket breakag...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Airtravelandloyaltypoints
The main chang...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Arrangementswithnon-airlinepartners
6
Ho...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Loyaltyprogrammes
7
How will you account...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Ancillaryservicesandchangefees
Does your...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Interlinecargo,airportchargesandtaxes
9
...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Travelvouchers
10
How will you account f...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Holidaypackages
11
Do your accounting po...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Transitionadjustments
12
Use the helpful...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Disclosurerequirements
13
Read our Guide...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Checklistofactions
Have you…? 
Determin...
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Howdidyoudo?
15
How many of our 10 quest...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Don’tforgetthebroaderbusinessimpacts
Hav...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Moreinformationaboutairlineaccounting
17...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
Nextsteps
18
Talk to your
usual KPMG
con...
© 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved.
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Airlines | IFRS 15 Revenue - Are you good to go?

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Practical guidance for airlines on implementing the new revenue recognition standard. Find out more at kpmg.com/ifrs.

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Airlines | IFRS 15 Revenue - Are you good to go?

  1. 1. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. AirlinesIFRS 15 Revenue – Are you good to go? June 2017 kpmg.com/ifrs
  2. 2. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Areyougoodtogo? 2 IFRS 15 will change the way many airlines account for their air tickets, cargo airway bills, loyalty points and change fees. To help you drive your implementation project to the finish line, we’ve pulled together a list of key considerations that many airlines need to focus on.
  3. 3. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. 3 For each of the following, documenting your analysis and the conclusions drawn will be essential
  4. 4. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Ticketbreakage 4 How will ticket breakage impact the timing of your revenue recognition? It is highly probable that breakage will not result in a significant revenue reversal For many airlines, this will be on the flight date but not before You can recognise revenue if… Ensure your systems are capable of supplying reliable data for estimates You need to… Treat tickets consistently based on their sale terms – e.g. refundable, changeable
  5. 5. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Airtravelandloyaltypoints The main change from IFRIC 13 Customer Loyalty Programmes relates to the estimation method 5 How will you estimate the stand-alone selling price for air travel? The residual method may no longer be available for air tickets sold with loyalty points The allocation of revenue between air travel and loyalty points will probably change based on our understanding of common industry practice
  6. 6. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Arrangementswithnon-airlinepartners 6 How will your accounting change? Think about… Sale of loyalty points | Co-branding | Access to airline customer lists | Advertising ― Number and nature of performance obligations ̶ There will probably be more than one ― Allocation of transaction price ― Timing of revenue recognition ― Method for measuring obligations satisfied over time Valuation of components can be complex Consider…
  7. 7. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Loyaltyprogrammes 7 How will you account for tier status benefits and estimated point redemptions? You need to consider… Whether material benefits provided to members need to be accounted for separately Whether you need to change your accounting policy for changes in estimated redemptions of loyalty points and
  8. 8. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Ancillaryservicesandchangefees Does your accounting policy meet the requirements of IFRS 15? 8 If credit card fees are incremental costs of obtaining the contract, then they are deferred and recognised on the flight date Recognise revenue together with the original ticket – i.e. on the date of travel – unless it is a separate performance obligation Recognise revenue when you receive the change fees You’ll need to… You can no longer…
  9. 9. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Interlinecargo,airportchargesandtaxes 9 Have you reassessed whether you are acting as a principal or an agent under IFRS 15? Presentation of revenue for interline cargo transportation is likely to change Principal Agent Role in transaction Present revenue gross Present revenue net Accounting treatment
  10. 10. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Travelvouchers 10 How will you account for them? Generally, travel vouchers will not be recognised as expenses Variable consideration Customer option Mandatory penalty for non-performance – e.g. delayed/cancelled flights Discretionary additional goods or services – e.g. free tickets/meals MethodWhat are the vouchers for? Deduct from revenue Defer revenue until goods or services are redeemed Accounting treatment
  11. 11. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Holidaypackages 11 Do your accounting policies for holiday packages meet the requirements of IFRS 15? Flight Hotel Restaurant or other admission tickets Number of performance obligations | Timing of revenue recognition | Principal vs agent + + For example… Think about…
  12. 12. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Transitionadjustments 12 Use the helpful guidance in our Transition Options and Issues In-Depth publications IFRS 15 is more detailed than the existing revenue requirements, so you may find unexpected changes in your accounting Have you identified all of the areas where differences exist between IFRS 15 and your existing accounting?
  13. 13. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Disclosurerequirements 13 Read our Guide to annual financial statements – IFRS 15 supplement Under IFRS 15, you’ll need to provide more detailed information about contract terms, as well as how and when you recognise revenue Have you identified the additional information and processes needed to meet the disclosure requirements?
  14. 14. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Checklistofactions Have you…?  Determined the appropriate timing of revenue recognition for ticket breakage?  Worked out how you will allocate revenue between air travel and loyalty points – ensuring that your accounting policy for estimating stand-alone selling prices complies with IFRS 15?  Determined how you will account for your arrangements with non-airline partners?  Chosen your accounting policies for loyalty programme tier status benefits and estimated point redemptions?  14 Have you…?  Determined the appropriate timing of revenue recognition for ancillary services and change fees?  Assessed whether you act as a principal or an agent – particularly for interline cargo, airport charges and taxes?  Assessed how you will account for travel vouchers issued?  Checked that your accounting policy for holiday packages meets IFRS 15’s requirements?  Identified and quantified your transition adjustments?  Identified the additional information needed to meet the disclosure requirements? 
  15. 15. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Howdidyoudo? 15 How many of our 10 questions have you answered ‘yes’? All 10 – You’re good to go! 5-9 – You’re on your way 0-4 – You really need to engage
  16. 16. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Don’tforgetthebroaderbusinessimpacts Have you… ― updated your management reporting, including KPIs? ― developed a transition plan for parallel runs, including reconciliations? ― thought about the tax implications? ― calculated the impact on bonus schemes? ― compared your approach with peers? Revenue Accounting Change Accounting, tax and reporting Data, systems and processes Business People and change 16
  17. 17. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Moreinformationaboutairlineaccounting 17 IAWG accounting guides www.iata.org
  18. 18. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. Nextsteps 18 Talk to your usual KPMG contact Use our Transition toolkit Follow the discussion on LinkedIn
  19. 19. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. © 2017 KPMG IFRG Limited, a UK company limited by guarantee. All rights reserved. KPMG International Standards Group is part of KPMG IFRG Limited. KPMG International Cooperative (“KPMG International”) is a Swiss entity that serves as a coordinating entity for a network of independent firms operating under the KPMG name. KPMG International provides no audit or other client services. Such services are provided solely by member firms of KPMG International (including sublicensees and subsidiaries) in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any other member firm, nor does KPMG International have any such authority to obligate or bind KPMG International or any other member firm, in any manner whatsoever. The KPMG name and logo are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. kpmg.com/socialmedia

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