Customer Loyalty Programmes

IFRIC 13

ANNOUNCEMENT: IFRS 15 has replaced IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC-31 for annual period beginning on or after January 1, 2018


The Notes Below are only applicable for annual periods ending on or before Dec 31, 2017.



Customer Loyalty Programmes

IFRIC 13

Definition

Customer loyalty programs are used by entities to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the entity grants the customer award credits (i.e. points). The customer can redeem the points for awards such as free or discounted goods or services

Scope

This Interpretation applies to customer loyalty award credits (points) that:

  • an entity grants to its customers as part of a sales transaction, i.e. a sale of goods, rendering of services or use by a customer of entity assets; and
  • the customers can redeem in the future for free or discounted goods or services
Accounting for customer loyalty programs
  • An entity applies the concept of multiple deliverables (from IAS 18) and accounts for the customer loyalty points as a separately identifiable component of the sale
  • The fair value of the consideration received or receivable from the sale is allocated between:
    • the award credits (points) and
    • the other components of the sale
  • The consideration allocated to the award credits (points) shall be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately
  • recognize the consideration allocated to award credits as revenue when award credits (points) are redeemed and it fulfils its obligations to supply awards
  • The amount of revenue recognized shall be based on the number of award credits (points) that have been redeemed in exchange for awards, relative to the total number expected to be redeemed
Comparison to ASPE
  • Under ASPE no specific guidance on customer loyalty program; however, based on the concept of multiple deliverables, it will likely be accounted for similarly

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