Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

How do we report Customers' Loyalty programme in Financial statements and what is the methodology being adopted to estimate the amount envisaged?

user-image
Question added by Jawad Qureshi , Financial Consultant , AFAZA FZ LLC/Midas Safety Dubai
Date Posted: 2014/10/20

we can report the loyalty programme for customers or receivablesin financial statemens using the financial anlysis ratiosaccording to IFRS

Mohammad Shamim Ahmad
by Mohammad Shamim Ahmad , Senior Supervisor-Internal Control & Compliance , WOQOD - Qatar Fuel

FRIC13 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.

Key provisions of IFRIC13 is as follows in respect of reporting loyalty programme and measurement

  • An entity that grants loyalty award credits shall allocate some of the proceeds of the initial sale to the award credits as a liability (its obligation to provide the awards). In effect, the award is accounted for as a separate component of the sale transaction.
  • The amount of proceeds allocated to the award credits is measured by reference to their fair value, that is, the amount for which the award credits could have been sold separately.
  • The entity shall recognise the deferred portion of the proceeds as revenue only when it has fulfilled its obligations. It may fulfill its obligations either by supplying the awards itself or by engaging (and paying) a third party to do so.
  • If at any time the expected costs of meeting the obligation exceed the consideration received, the entity has an onerous contract for which IAS37 would require recognition of a liability.

Akram Massoud
by Akram Massoud , FINANCE MANAGER , Autoexcellence LTD

IFRIC13 "Customer Loyalty Programmes". This interpretation establishes the accounting treatment of free or discounted goods and services given by companies to their customers as part of a customer loyalty scheme in the form of points or other types of credit when they sell a good or provide a service.  were measured as a cost under "Other Operating Costs" on the consolidated income statement and a provision for the estimated value of outstanding points at the end of each year was booked under "Trade and Other Payables Trade Payables" on the consolidated statement of financial position. 

More Questions Like This

Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.