Up until now there has been little guidance on accounting for these programmes. Scope consensus ifric applies to customer loyalty award credits that. These credits can be redeemed in the future for free or discounted goods. Accounting for customer loyalty programmes purpose the purpose of this paper is to present the views and challenges from a range of accounting professionals.
As a result, there was no clear guidance on how to account for future discounts, or coupons. For other transactions, there was ias 18 revenue, but that standard was quite general and did not offer much guidance. Scope ifrs 15 applies to contracts with customers to provide goods or services. How to account for customer incentives under ifrs ifrsbox. Jul 07, 2014 this playlist contains sample videos of the tabaldi ifric customer loyalty programmes revenue video series. Most telcos operate in a highly competitive environment and invest significantly in acquiring and retaining customers. Ifric decided to proceed with view 1 as proposed in d14. Ifric customer loyalty programmes, its effects on the information quality of companies accounting. Air travel and loyalty points the main change from ifric customer loyalty programmes relates to the estimation method 5 how will you estimate the standalone selling price for air travel. Listing of international financial reporting standards. If a customer buys goods or services, the entity grants the customer award credits. It then goes on to provide guidance on how the approach should be implemented. In particular it provides guidance as to whether ias. The scope and authority of interpretations are set out in paragraphs 2 and 717 of the preface to international financial reporting standards.
The costs and benefits of implementing ifric customer. Customer loyalty programmes the ifric continued its discussion begun at the november 2005 meeting on the basis of a paper prepared by staff of the. The scope and authority of interpretations are set out in paragraphs 2 and716 of the preface to international financial reporting standards. Ken wild, deloittes global ifrs leader and an ifric member says. In addition, some programmes such as discount vouchers distributed to the general public by supermarkets have features similar to those of customer loyalty programmes, but are really marketing schemes. Ifric customer loyalty programmes, its effects on the information quality of. Most telcos operate in a highly competitive environment and invest significantly in acquiring and retaining. According to ifric, a customer loyalty programme has the following. Customer loyalty programmes ifric customer loyalty programmes was developed by the international financial. Ifric customer loyalty programmes was developed by the international financial reporting interpretations committee and issued by the international accounting standards board in june 2007. Purpose the purpose of this paper is to present the views and challenges from a range of accounting professionals, regulators and preparers with the introduction of a standardised approach to accounting for customer loyalty programmes clps. Ifric 15 agreements for the construction of real estate icaew. Ifric interpretation customer loyalty programmes ifric customer loyalty programmes was developed by the international financial reporting interpretations committee and issued by the international accounting standards board in june 2007. Purpose the purpose of this paper is to present the views and challenges from a range of accounting professionals, regulators and preparers with the introduction of a standardised approach to.
If a customer buys goods or services, the entity grants the customer award credits often described as points. Instead they will either be applying a variant of the accounting required by ifric or will be treating the sales transaction as involving just a single component and, as a result, providing for the cost of awards. Ifric 15 addresses how real estate developers should recognise revenue for the sale of units, such as flats or houses, before construction is complete. Hkifricint is accompanied by illustrative examples and a. The effective date of the latest amendment is 1 january 20. Interpretation ifric customer loyalty programmes as amended, issued by the international accounting standards board iasb. If an entity applies the interpretation for a period. Ifric addresses how an entity accounts for loyalty award credits that entitle customers to free or discounted goods or services for example, airline frequent. Ifric interpretation customer loyalty programmes ifric customer loyalty programmes was developed by the international financial reporting interpretations committee and issued by the. Agreements for the construction of real estate ifric 16. Paragraphs that have been added to this interpretation and do. Aasb interpretation customer loyalty programmes as amended is set out in paragraphs 1 11 and the appendix.
Such programmes are often used by companies operating in e. Paragraphs that have been added to this interpretation and do not appear in the text of ifric are identified with the prefix aus, followed by the number of the preceding ifric paragraph and decimal numbering. When the points are redeemed and the free goods are given to the customer the expense is. Ifric , customer loyalty programmes, addresses award programmes which typically involve the customer purchasing goods or services and the entity granting the customer awardcredits that can be used to obtain free or discounted goods or services in the future. Specifically, it explains how such entities should. Ifric customer loyalty programmes has recently been issued by. Ifric is accompanied by illustrative examples and a basis for. Ifric interpretation customer loyalty programmes ifric is set out in paragraphs 111 and the appendix. Ifric addresses accounting by entities that grant loyalty award credits such as points or travel miles to customers who buy other goods or services. The customer can redeem the award credits for awards such as free or discounted goods or services.
Interpretations are listed in australian accounting standard aasb 1048 interpretation of standards. Ifrs 15 revenue from contracts with customers 2 defined terms ifrs 15 defines the following terms that form an integral part of this ifrs. Customer loyalty programmes are programmes whereby customers who buy goods or services are awarded credits such as reward points or travel miles by an entity. Ifric is accompanied by illustrative examples and a basis for conclusions. Ifric interpretation customer loyalty programmes the text of the unaccompanied ifric is contained in part a of this edition. These principles are then illustrated practically in class examples that focus on journalising the recognition and measurements principles contained in the interpretation. Free gifts such as mp3 players or digital cameras on signing or renewing a. Accounting for customer loyalty programmes purpose the purpose of this paper is to present the views and challenges from a.
In particular it provides guidance as to whether ias 18 or ias 11 should apply. This part presents the following accompanying documents. Ifric customer loyalty programmes ifrs standards tracker. Revenue and, when applicable, profit should be recognised on the construction phase of the arrangement, when the requirements of ias 11 are met. Hong kong ifric interpretation customer loyalty programmes hkifricint is set out in paragraphs 1 11 and the appendix. Ifric customer loyalty programmes ifric 14 ias 19 the limit on a defined benefit asset, minimum funding requirements and their interaction ifric 15 agreements for the construction of. Ifric addresses accounting by entities that grant loyalty award credits such as. Revenue recognition how to account for free gifts and loyalty programmes 30. When accounting for customer loyalty programs today, companies have to follow the rules of ias 18 which offers two ways of accounting. Ifric, customer loyalty programmes, addresses award programmes which typically involve the customer purchasing goods or services and the entity granting the customer awardcredits that can be.
It does not apply to certain contracts within the scope of other ifrss such as lease contracts. Revenue recognition how to account for free gifts and. Ifric customer loyalty programmes its effects gupea. Ias 19 the limit on a defined benefit asset, minimum funding requirements and their interaction ifric 15. Ifric requires that the proceeds of the initial sale is split between. Background on ifric customer loyalty programmes many entities operate schemes that are designed to encourage those who buy their goods or services to buy further goods or services from. Ifric ifric interpretation customer loyalty programmes ifric is set out in paragraphs 111 and the appendix. Ifric 3 ifric interpretation customer loyalty programmes ifric is set out in paragraphs 111 and the appendix.
From 1 july 2008 ifric becomes mandatory in australia, requiring a standardised deferred revenue treatment to account for a plethora of customer loyalty programmes clp. Ifric 15 agreements for the construction of real estate. Ias 19 the limit on a defined benefit asset, minimum funding requirements and their interaction. Customer loyalty programmes are widespread and no two are exactly alike. Hk ifric int customer loyalty programmes 5 hk ifric int april 2012february 2014 effective date and transition 10 an entity shall apply this interpretation for annual periods beginning on or after 1 july 2008.
Ifric and the ambiguities of revenue recognition introduction from 1 st july 2008 reporting entities in australia must apply ifric customer loyalty programmes. Ifric addresses the accounting by the entity that grants award credits. Ifric class example for measurement of customer loyalty. An entity grants to its customers as part of a sales transaction, i.
This playlist contains sample videos of the tabaldi ifric customer loyalty programmes revenue video series. Service concession arrangements model reassessment of. 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. Ifric customer loyalty programmes financial analysis. Ifric ifric interpretation customer loyalty programmes references ifrs fair value measurement ias 8 accounting policies, changes in accounting estimates and errors ias 18. These customer loyalty programmes can take many different forms. Ifric customer loyalty programmes effects study report 5 programmes within the scope of ifric will not be. Ifric customer loyalty programmes effective date periods beginning on or after 1 july 2008 recognition of revenue applying ias 18 specific quantitative disclosure requirements. Ifric states that approach a above is the correct interpretation of ifrs. Ifric and its accompanying documents have been amended by improvements to ifrss, issued in may 2010. Hkifricint customer loyalty programmes 5 hkifricint april 2012february 2014 effective date and transition 10 an entity shall apply this interpretation for annual periods beginning on. For example, we had to apply ifric customer loyalty programs to accounting for loyalty awards to customers. In addition, some programmes such as discount vouchers.
Industry views telecommunications industry accounting group. Hedges of a net investment in a foreign operation ifric 17. Ifric customer loyalty programmes clps1 ifric, 2007 in an attempt to. Ifric customer loyalty programmes its effects on the.
Contract an agreement between two or more parties that. Background on ifric customer loyalty programmes many entities operate schemes that are designed to encourage those who buy their goods or services to buy further goods or services from them. Instead they will either be applying a variant of the accounting required by ifric or. Accounting for customer loyalty programmes request. Customer loyalty programmes have grown more widespread in recent years and are now being offered with all types of product and service purchases. The customers can redeem the points for free or discounted goods and services.
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