Chap 2

• Premiums


  Articles of value such as toys, dishes, silverware and other goods given to customers as result of past sales or sales promotion activities
• Free product, discount and rebate


  Customer incentives offered in a contract of sale of goods to stimulate sales
• IFRS 15 on customer options


  • At contract inception, an entity shall assess the goods promised and identify as a performance obligation each promise to transfer to the customer either a distinct good or a series of distinct goods that are substantially the same and that have the same pattern of transfer to the customer
  • Such options to purchase additional goods provide the customer a material right and therefore give rise to a performance obligation that the seller must satisfy
• Accounting for customer options

  1. The entity has two performance obligations: 1. To deliver or transfer the goods or products sold, 2. To satisfy the customer options for coupons for free product, discount and rebate

  2. The transaction price shall be allocated between the products sold and the customer options based on relative stand-alone selling price

  3. The allocated transaction price of the customer options shall be deferred and recognized as income when options are exercised or when the options expire
• Rebate coupons


  Coupons for discounts that end-customers receive, which manufacturers may reimburse retailers for
• Accounting for rebate coupons

  1. The transaction price shall be allocated between the products sold and the rebate liability based on relative stand-alone selling price

  2. The stand-alone selling price of the rebate coupon is equal to discount on the products sold during the year adjusted by the expected redemption
• Gift certificates


  Nonrefundable certificates sold by department stores for future delivery of goods, where some customers may not redeem them (breakage)
• Accounting for gift certificates

  The seller shall recognize revenue from breakage based on the value of certificates redeemed in proportion to the expected value of certificates to be redeemed
• Customer loyalty program


  A program to reward customers for past purchases and provide incentives for further purchases, often through award credits or "points"
• Accounting for customer loyalty programs

  1. The granting of award credits is accounted for as a future delivery of goods or services

  2. The transaction price shall be allocated to each performance obligation (sale and award credits) on a relative stand-alone selling price basis

  3. The consideration allocated to the award credits is initially recognized as deferred revenue and subsequently recognized as revenue when the award credits are redeemed

  4. The amount of revenue recognized shall be based on the number of award credits that have been redeemed relative to the total number expected to be redeemed, with changes in the estimate reflected in current and future periods