News Article - 03 July 2007
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The International Accounting Standards Board's (IASB's) international financial reporting interpretations committee (IFRIC) has released an interpretation of its guidelines for firms operating customer loyalty schemes.

Specifically designed for companies that provide loyalty points, travel miles and other such credits to customers, the interpretation - entitled IFRIC 13 - looks at how businesses should account for obligations to offer products and services in return for redeemed reward points or miles.

The guidelines state that businesses need to ensure a portion of the initial sales proceeds are allocated to the award credits in question, with these only being recognised as revenue after obligations are fulfilled, either by providing the awards themselves or by doing so through another company.

"Until now, international standards have lacked clear guidance for award credits granted 'free' with other goods or services," commented Robert Garnett, IFRIC chairman and member of the IASB.

"The interpretation will standardise practice in a way that reflects our view that loyalty awards are separate goods or services for which customers are implicitly paying."

Last week, the IASB launched a field testing programme for its proposals concerning an exposure draft of an international financial reporting standard for small and medium-sized entities.

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