IFRIC guidance on customer loyalty programmes

28 June 2007

IFRIC issued an Interpretation, IFRIC 13 Customer Loyalty Programmes. The Interpretation addresses accounting by entities that grant loyalty award credits 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 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.

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