IFRIC 13: How ready are you?

IFRIC 13, Customer Loyalty Progrommes, addresses award programs which typically involve the customer purchasing goods or services and the entity granting the customer award-credits that can be used to obtain free or discounted goods or services in the future. IFRIC 13 requires the consideration to b...

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Bibliographic Details
Published in:	Accountancy Vol. 141; no. 1374; p. 80
Main Author:	Sacho, Zwi Y
Format:	Trade Publication Article
Language:	English
Published:	London The Financial Times Limited 01-02-2008
Subjects:	Brand loyalty Fair value International Financial Reporting Standards Loyalty programs
Online Access:	Get full text
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Summary:	IFRIC 13, Customer Loyalty Progrommes, addresses award programs which typically involve the customer purchasing goods or services and the entity granting the customer award-credits that can be used to obtain free or discounted goods or services in the future. IFRIC 13 requires the consideration to be allocated between the sale of the goods or services and the award-credits based on the fair value of the credits. The liability remains on the sellers balance sheet until the customer redeems award credits or they expire, at which time the liability is debited and revenue credited. Companies will therefore be required to design pricing models to value the award-credits which incorporate the following variables: 1. fair value per award-credit, 2. number of award-credits outstanding, 3. expected redemption rate, and 4. forfeiture rate. IFRIC 13 is to be applied to all financial statements beginning on or after Jul 1, 2008.
ISSN:	0001-4664