IFRIC issues guidance on customer loyalty programmes
The International Financial Reporting Interpretations Committee (IFRIC)∗
has today issued
an Interpretation, IFRIC 13 Customer Loyalty Programmes.
The Interpretation addresses accounting by entities that grant loyalty award credits (such as
‘points’ or travel miles) to customers who buy other goods or services. Specifically, it
explains how such entities should account for their obligations to provide free or discounted
goods or services (‘awards’) to customers who redeem award credits.
The Interpretation requires entities to allocate some of the proceeds of the initial sale to the
award credits and recognise these proceeds as revenue only when they have fulfilled their
obligations. They may fulfil their obligations by supplying awards themselves or engaging
(and paying) a third party to do so.
The effect of the Interpretation will be to ensure that obligations to supply customer loyalty
awards are measured the same way, whether the award credits are sold separately or granted
to customers as part of a larger sale.
Introducing IFRIC 13, Robert Garnett, IFRIC Chairman and IASB member, said:
Until now, international standards have lacked clear guidance for award credits granted
‘free’ with other goods or services. The Interpretation will standardise practice in a
way that reflects our view that loyalty awards are separate goods or services for which
customers are implicitly paying.
The IFRIC has been assisted on this project by staff of the French national standardsetter,
the Conseil National de la Comptabilité. We are grateful to the CNC for this
support.