Help needed for economic moron
Can someone please explain, (in plain terms, no MBA wank speak), how it is that a Frequent Flyer business can be counted as a tangible asset.
To my unqualified sense of reasoning:
Frequent Flyer points are a perishable paper asset of the member, held in trust by the provider, redeemable in the transfer of goods or services, created by the provider or an affiliate, (co-service provider).
As points are in effect a credit note granting that the provider owes reward to the member (for services previously bought and paid for), there is no further flow from the member to the provider, but there is an obligation on the part of the provider. This surely is a liability, not an asset.
If the parent company folds, members FF points dissolve and have no worth, to either party.
I get the fact that co-providers probably pay a royalty to QANTAS to be a part of the program, but, presumably future participation/contribution would be conditional on both sides, and as such could hardly be counted as guaranteed revenue. And is it seriously contemplated that the value of the co-providers participation, exceeds the liability by billions of dollars.
How is it that the FF program, a paper shell, is categorised as a bona fide asset that can legitimately be carried on the positive side of the books rather than the deficit side.
Why the hell would anyone want to buy into it.
Maui EM
(economic moron)