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IFRIC 13 — Customer Loyalty Programmes

References

  • IAS 18 Revenue
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets
  • IAS 38 Intangible Assets

History

  • IFRIC D20 was issued 7 September 2006. Click for press release
  • Comment deadline was 6 November 2006
  • IFRIC Interpretation 13 Customer Loyalty Programmes was issued 28 June 2007 Click for press release (PDF 63k)
  • Effective date of IFRIC 13: Annual periods beginning on or after 1 July 2008. Earlier application permitted.
  • 6 May 2010: IFRIC 13 amended for Annual Improvements to IFRSs 2010 effective 1 January 2011

Summary of IFRIC 13

IFRIC 13 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

  • 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 fulfil 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 IAS 37 would require recognition of a liability.
  • If IFRIC 13 causes an entity to change its accounting policy for customer loyalty awards, IAS 8 applies.

Effective date

IFRIC 13 is effective for annual periods beginning on or after 1 July 2008. Earlier application is permitted.