What are the current International Financial Reporting Standards regarding customer loyalty programs (such as frequent flyer points)?
A) They are recognized only in the financial statement notes.
B) They are recognized only when customers redeem their points.
C) They are not explicitly addressed.
D) The current proceeds are to be split between the original transaction and the award credits (as unearned revenue).

Question

Quizplus · Accepted Answer

Under the International Financial Reporting Standards (IFRS), customer loyalty programs are addressed by IFRIC 13, which requires that the fair value of the consideration received or receivable be allocated between the awarded credits and the other components of the sale. This means that the proceeds from the transaction that includes the award credits (such as frequent flyer points) are to be split between the initial sale and the award credits, with the portion allocated to the award credits recognized as unearned revenue (deferred revenue) until the obligation is fulfilled.

What Are the Current International Financial Reporting Standards Regarding Customer