This interpretation addresses the accounting by entities that provide their customers with incentives to buy goods or services. 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 customer loyalty programmes was developed by the international financial reporting interpretations committee and issued by the international accounting standards board in june 2007. Applying ifric , the entity allocates some of the consideration from the initial sale to the award credits as a liability. Examples of such schemes are air miles earned by passengers from airlines, free. Ifric customer loyalty programmes its effects on the. Ifric requires that the proceeds of the initial sale is split between. Ifric addresses how an entity accounts for loyalty award credits that entitle customers to free or discounted goods or. Ifric will be superseded by ifrs 15 revenue from contracts with customers which has a mandatory effective date of 1 january 2018. The ifric decided to expand the basis for conclusions to explain more fully its reasons for concluding that customer loyalty awards should be regarded as a separate component of the initial sale in accordance with paragraph of. For every eur 100 worth of purchases, a customer receives 5 loyalty points.
In september 2015 the iasb issued an amendment to ifrs 15 that defers the. 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. Accounting for loyalty programmes has varied, with many companies treating the cost of redeeming award credits as a marketing expense. It aims to highlight the ambiguities of the classification of commercial transactions, particularly the nature and timing of revenue recognition. Ifric 3 ifric interpretation customer loyalty programmes ifric is set out in paragraphs 111 and the appendix.
Industry views telecommunications industry accounting group. Ifric is accompanied by illustrative examples and a basis for conclusions. The scope and authority of interpretations are set out in paragraphs 2 and716 of the preface to international financial reporting standards. Ifric ifric interpretation customer loyalty programmes ifric is set out in paragraphs 111 and the appendix. 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. 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. Such programmes are often used by companies operating in e. Ifric addresses how an entity accounts for loyalty award credits that entitle customers to free or discounted goods or services for example, airline frequent flyer programmes. Ifric is effective for annual periods beginning on or after 1 july 2008.
Ifric customer loyalty programmes effect study report. An entity grants to its customers as part of a sales transaction, i. 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. Ifric decided to proceed with development of a draft interpretation based on applying paragraph of ias 18. Customer loyalty programmes bound volume 2016 consolidated without early application. Ifric customer loyalty programmes the board has not undertaken any specific implementation support activities relating to this interpretation. Ifric customer loyalty programmes effects study report 5 programmes within the scope of ifric will not be.
Up until now there has been little guidance on accounting for these programmes. Bc1 this basis for conclusions summarises the ifric s considerations in reaching its consensus. Hk ifric int customer loyalty programmes 4 hk ifric int february 2014 b if consideration is allocated to the award credits. Ifric 15 agreements for the construction of real estate. Accounting for customer loyalty programmes purpose the purpose of this paper is to present the views and challenges from a. The accounting for customer loyalty programmes under ifrs 15 is largely. Ifric 17 distributions of noncash assets to owners.
Cl 8 ifric d20 customer loyalty programmes uk asb comment letter. Example 1awards supplied by the entity ie1 a grocery retailer operates a customer loyalty programme. 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. Draft ifric x is accompanied by a basis for conclusions. Ifric customer loyalty programmes ifrs standards tracker. Ifric draft interpretation d20 customer loyalty programmes ifric draft interpretation x customer loyalty programmes draft ifric x is set out in paragraphs 112.
Accounting for customer loyalty programmes purpose the purpose of this paper is to present the views and challenges from a range of accounting professionals. In order to do that, efrag has been carrying out a technical assessment of ifric against the criteria for endorsement set out in regulation ec no 16062002 and is now carrying out a separate assessment of the costs and benefits that would arise. Ifric customer loyalty programmes financial analysis. Interpretation committee ifric customer loyalty programmes, on 1 july 2007.
Ifric clarifies that loyalty programmes are multiple element arrangements, in which the consideration received for the. Section 1500 of the secs division of corporation finances financial reporting manual. Accounting for customer loyalty programmes request. 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 customer loyalty programmes, ifric 15 agreements for the. The ifrs foundations logo and the ifrs for smes logo, the iasb logo, the hexagon device, eifrs, ias, iasb, ifric, ifrs, ifrs for smes, ifrs foundation, international accounting standards, international financial reporting standards, niif and sic are registered trade marks of the ifrs foundation, further details of which are available from the ifrs.
Ifric ifric interpretation customer loyalty programmes references ifrs fair value measurement ias 8 accounting policies, changes in accounting estimates and errors ias 18 revenue ias 37 provisions, contingent liabilities and contingent assets background 1 customer loyalty programmes are used by entities to provide customers with incentives to buy their goods. Should credit card issuing banks combine contracts with its cardholders who participate. Reporting interpretations committee ifric of ifric , customer loyalty programmes, has implications for telecom operators. 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. Ias 18 revenue, ifric customer loyalty programmes, ifric 15. Ifric interpretation customer loyalty programmes ifric customer loyalty programmes was developed by the international financial. Ifric customer loyalty programmes, its effects on the information quality of companies accounting. Ifric 10 interim financial reporting and impairment.
Ifric interpretation customer loyalty programmes this basis for conclusions accompanies, but is not part of, ifric. The scope and authority of interpretations are set out in paragraphs 1 and 810 of the ifric preface. Ifric customer loyalty programmes on 28 june 2007, the international financial reporting interpretations committee ifric issued a new interpretation entitled customer loyalty programmes. The iasb and the fasb have formed a group of external stakeholders to. Ifrs preparers may need to make substantial changes to. According to ifric, a customer loyalty programme has the following characteristics. Find out more about the benefits of membership and joining details. Ifric was issued on 28 june 2007 and should eliminate much of this diversity.
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. Hk ifric int customer loyalty programmes 7 hk ifric int april 2012february 2014 illustrative examples these examples accompany, but are not part of, hk ifric int. Cl o9 ifric d20 customer loyalty programmes dasc comment letter. Ifric customer loyalty programmes has recently been issued by the international financial reporting interpretation committee. An entity shall combine two or more contracts entered into at or near the. Currently, under the indian generally accepted accounting principles gaap, banks estimate the probable redemption of debit card and credit card award points. On 28 june 2007, the international financial reporting interpretations committee ifric issued a new interpretation entitled customer loyalty programmes.
These award points can then be redeemed by customers for various thirdparty goods or services. Ifric and the ambiguities of revenue cecognition abstract 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. These customer loyalty programmes can take many different forms. Interpretation ifric customer loyalty programmes as amended, issued by the international accounting standards board iasb. These points can be spent on purchases from entity a and each point can be spent on eur 1 worth of purchases. Ifric customer loyalty programmes, ifric 15 agreements for the construction of real estate, ifric 18 transfers of assets from customers and sic31 revenue barter transactions involving advertising services. If a customer buys goods or services, the entity grants the customer award credits often described as points. Ifric addresses accounting by entities that grant loyalty award credits such as points or travel miles to customers who buy other goods or services. Ifric 16 hedges of a net investment in a foreign operation. Entities use loyalty programmes to incentivise customers to buy additional. When accounting for customer loyalty programs today, companies have to follow the rules of ias 18 which offers two ways of accounting.
These credits can be redeemed in the future for free or discounted goods. Ifric and its accompanying documents have been amended by improvements to ifrss, issued in may 2010. Individual ifric members gave greater weight to some factors than to others. Industry views telecommunications industry accounting group making sense of a complex world ifric customer loyalty programmes. Ifric member 7 contacts issue of the month ifric releases new interpretations on customer loyalty plans and mfr ifric accounting for customer loyalty programmes customer loyalty programmes are widespread retailers, airlines, hotels, telecoms operators and similar businesses are all offering incentives to gain customer loyalty. Ifric applies to customer loyalty award credits that.
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