14 July 2008

New international accounting rules to impact FF Programs?

New rules have been instituted by those most imaginative of people (aka Accountants). These new rules from the International Accounting Standards Board, which have just come into effect, mean that the cost of frequent flyer rewards should be valued at ‘the amount for which the award credits could be sold separately’.

I seem to recall that this has been attempted before by the US Accounting standards group and also by the US tax authorities. In both cases it was pushed back for obvious reasons. There are only two ways to deal with this – either at the recipient end or the “pusher” end. In both cases it’s a bad thing to do and stupid.

However lest anyone think that I suffer from a lack of imagination, here is a scenario that gets some bite to it. The airlines decide this is a great opportunity to get rid of FF programs once and for all. With liability sitting out there to the tune of approx 10 trillion miles at a value of between 10 and 20 cents a mile with this in the hands of nearly 200 million people… doesn’t make sense. Accountants are always looking for stuff for them to do, they still mourn the creation of the proletarian spreadsheet software, so if they cant get what they want in direct employment then they will figure out a way to encourage a tax. As a certain Shakespearian character said “ a pox on you!”

No comments: