The accounting treatment of credit card rewards programmes : a South African perspective (part II)
CITATION: Brink, S. M. 2017. The accounting treatment of credit card rewards programmes : a South African perspective Part II. Journal of Economic and Financial Sciences, 10(2): 206-234, doi:10.4102/jef.v10i2.14.
The original publication is available at https://jefjournal.org.za
Most credit card issuers offer their card holders participation in a customer loyalty programme. On 1 July 2007 the IASB issued IFRIC 13 Customer Loyalty Programmes to give specific guidance to suppliers on the accounting treatment of customer loyalty programme transactions. Despite the fact that credit card rewards programmes are specifically included in the scope of this Interpretation, in practice not all credit card rewards programmes currently account for award credits under the revenue deferral model (IFRIC 13). These divergent practices make one question the relevance of the current guidance provided in IFRIC 13 to credit card rewards programmes; otherwise what is the reason behind credit card rewards programmes accounting for these transactions differently? During May 2014 the IASB and the United States Financial Accounting Standards Board (FASB), published IFRS 15 Revenue from Contracts with Customers intended to replace six existing Standards and Interpretations, including IFRIC 13. The aim of IFRS 15 is to streamline accounting for revenue across all industries and to correct inconsistencies in existing Standards and practices. Credit card rewards programme respondents raised many queries and uncertainties based on the proposed model but despite these concerns the Boards decided against providing any additional guidance to credit card rewards programmes. They indicated that they leave it up to management’s judgement to determine how to account for these transactions (in effect not achieving the aim of streamlining accounting for revenue across all industries). The main objective of the research reported in this article is to determine whether or not credit card rewards programmes should have been included in the scope of IFRIC 13 and consequently whether or not credit card rewards programmes should be included in the scope of IFRS 15. It was found that the differences between a credit card rewards programme and a typical customer loyalty programme prove that a credit card rewards programme transaction should be treated differently for accounting purposes and that these transactions should fall outside the scope of IFRIC 13 and IFRS 15.