• Register
Search Questions / Answers

Welcome to AccountantAnswer Forum, where you can ask questions and receive answers. Although you need not be a member to ask questions or provide answers, we invite you to register an account and be a member of our community for mutual help. You can register with your email or with facebook login in few seconds

Get AccountantAnswer App

Categories


Our company is doing car wash & services. Our customers are given a free car wash after 03 paid car washes as a customer loyalty program. My question is whether we need to recognize cost / revenue with regard to this program? What are the IFRS requirements in this regard?
in IAS 18 - Revenue by

1 Answer

0 votes
Customer loyalty programs are covered by IFRIC 13 — Customer Loyalty Programs. As per IFRIC 13 you need to assumes that the customer implicitly pays for the free service you offer under the scheme. And therefore a portion of the revenue you generate from the customer for the first 03 washes need to be allocated / deferred on a rational basis. For instance, assume you generally charge 25$ for a car wash then the total revenue you should have recognized at the end of the third wash should be = 25x3/4x3 = 56.25$ although you receive 75$. The balance income 18.75$ is deferred and recognized only when the free wash is completed. A question may arise as to what happens if the customer does not appear for the free wash. There you may analyze your past data and compute the % of customer who do not obtain the free wash and recognize the deferred revenue after a predetermined period.
by Level 1 Member (1.8k points)


...