Accounting for customer loyalty programme

15 December 2007 |

The International Financial Reporting Interpretations Committee (IFRIC) issued an Interpretation, ‘IFRIC 13 Customer Loyalty Programmes’. The IFRIC is the successor to the Standards Interpretation Committee (SIC) of the International Accounting Standards Board (IASB) and is the Interpretative arm of the IASB functioning much in the same way as our Accounting Standards Interpretation (ASI) does. IFRIC 13 was issued on June 28, 2007, and is applicable to accounting periods commencing on or after July 1, 2008.



Loyalty programmes have been developed as customer relationship management exercises and are designed to tie a customer to a particular entity. These programmes typically offer incentives in the form of ‘free’ products and services, the quantum being dependent upon the products and services a customer has bought. Every time a customer purchases a product or service, points are credited which are redeemable for either own products or services or third party products or services. The most common form of such schemes in India is operated by airlines. Retail trade which is evolving into malls and chains is beginning to offer similar schemes. The latest to get on board is a UK-based company dealing in currencies which is now offering award points.

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Regards,

Santosh Puthran
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