Many airlines have frequent flyer programs that permit travelers to accumulate credits that can be applied to the cost of tickets for future flights.Most airlines recognize the cost of their frequent flyer programs when the credits are used to purchase tickets.This practice, which seems to ignore the matching concept, results in:
A)stating liabilities and expenses at appropriate amounts.
B)overstating liabilities and expenses.
C)understating liabilities and expenses.
D)understating liabilities and overstating expenses.

Question

Quizplus · Accepted Answer

This practice results in understating liabilities and expenses because the cost is recognized only when credits are used, not when they are earned, delaying expense recognition.

Many Airlines Have Frequent Flyer Programs That Permit Travelers to Accumulate