Commission Regulation (EC) No 1262/2008 of 16 December 2008 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Interpretations Committee’s (IFRIC) Interpretation 13 (Text with EEA relevance)
Date: 2008-12-16
Institutions: European Commission
Subjects: accounting, capital market, financial transaction, information, international standard, management accounting, standardised accounting system

17.12.2008

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COMMISSION REGULATION (EC) No 1262/2008

of 16 December 2008

amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in
accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council
as regards International Financial Reporting Interpretations Committee’s (IFRIC) Interpretation 13

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,

establishing the European

Having regard to Regulation (EC) No 1606/2002 of
the
European Parliament and of the Council of 19 July 2002 on
the application of international accounting standards (1), and in
particular Article 3(1) thereof,

Whereas:

(1)

(2)

(3)

By Commission Regulation (EC) No 1126/2008 (2)
certain international accounting standards and interpre­
tations that were extant at 15 October 2008 were
adopted.

On 5 July 2007, the International Financial Reporting
Interpretations Committee (IFRIC) published IFRIC Inter­
pretation 13 customer loyalty programmes, hereinafter
‘IFRIC 13’.
inconsis­
IFRIC 13 eliminates the current
tencies in practice regarding the accounting treatment
of
free or discounted goods or services sold under
customer loyalty programmes that companies use to
award to their customers in form of points, air miles
or other credits upon the sale of a good or a service.

The consultation with the Technical Expert Group (TEG)
the European Financial Reporting Advisory Group
of
(EFRAG) confirms that
IFRIC 13 meets the technical
criteria for adoption set out in Article 3(2) of Regulation
In accordance with Commission
(EC) No 1606/2002.

to

Decision 2006/505/EC of 14 July 2006 setting up a
the
Standards Advice Review Group
advise
Commission on the objectivity and neutrality of
the
Reporting Advisory Group’s
European
Financial
(EFRAG) opinions (3),
the Standards Advice Review
Group considered EFRAG’s opinion on endorsement
and advised the European Commission that it is well
balanced and objective.

(4)

(5)

Regulation (EC) No 1126/2008 should therefore be
amended accordingly.

The measures provided for in this Regulation are in
accordance with the opinion of
the Accounting
Regulatory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

In the Annex to Regulation (EC) No 1126/2008 International
Financial Reporting Interpretations Committee’s (IFRIC)
Inter­
pretation 13 customer loyalty programmes is inserted as set
out in the Annex to this Regulation.

Article 2

Each company shall apply IFRIC 13, as set out in the Annex to
this Regulation, at the latest as from the commencement date of
its first financial year starting after 31 December 2008.

Article 3

This Regulation shall enter into force on the third day following
its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 16 December 2008.

For the Commission

Charlie McCREEVY
Member of the Commission

(1) OJ L 243, 11.9.2002, p. 1.
(2) OJ L 320, 29.11.2008, p. 1.

(3) OJ L 199, 21.7.2006, p. 33.

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ANNEX

INTERNATIONAL FINANCIAL REPORTING STANDARDS

IFRIC 13

‘IFRIC Interpretation 13 customer loyalty programmes’

Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with
the exception of the right to reproduce for the purposes of personal use or other fair dealing. Further infor­
mation can be obtained from the IASB at www.iasb.org

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IFRIC INTERPRETATION 13

Customer Loyalty Programmes

REFERENCES
— IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

— IAS 18 Revenue

— IAS 37 Provisions, Contingent Liabilities and Contingent Assets

BACKGROUND

1 Customer loyalty programmes are used by entities to provide customers with incentives to buy their goods or
services. If a customer buys goods or services, the entity grants the customer award credits (often described as
‘points’). The customer can redeem the award credits for awards such as free or discounted goods or services.

2 The programmes operate in a variety of ways. Customers may be required to accumulate a specified minimum
number or value of award credits before they are able to redeem them. Award credits may be linked to individual
purchases or groups of purchases, or to continued custom over a specified period. The entity may operate the
customer loyalty programme itself or participate in a programme operated by a third party. The awards offered may
include goods or services supplied by the entity itself and/or rights to claim goods or services from a third party.

SCOPE

3 This Interpretation applies to customer loyalty award credits that:

(a) an entity grants to its customers as part of a sales transaction, i.e. a sale of goods, rendering of services or use by

a customer of entity assets; and

(b) subject to meeting any further qualifying conditions, the customers can redeem in the future for free or

discounted goods or services.

The Interpretation addresses accounting by the entity that grants award credits to its customers.

ISSUES

4 The issues addressed in this Interpretation are:

(a) whether the entity’s obligation to provide free or discounted goods or services (‘awards’) in the future should be

recognised and measured by:

(i) allocating some of the consideration received or receivable from the sales transaction to the award credits and

deferring the recognition of revenue (applying paragraph 13 of IAS 18); or

(ii) providing for the estimated future costs of supplying the awards (applying paragraph 19 of IAS 18); and

(b) if consideration is allocated to the award credits:

(i) how much should be allocated to them;

(ii) when revenue should be recognised; and

(iii) if a third party supplies the awards, how revenue should be measured.

CONSENSUS

5 An entity shall apply paragraph 13 of IAS 18 and account for award credits as a separately identifiable component of
the sales transaction(s) in which they are granted (the ‘initial sale’). The fair value of the consideration received or
receivable in respect of the initial sale shall be allocated between the award credits and the other components of the
sale.

6 The consideration allocated to the award credits shall be measured by reference to their fair value, i.e. the amount for

which the award credits could be sold separately.

7 If the entity supplies the awards itself, it shall recognise the consideration allocated to award credits as revenue when
award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised shall be
based on the number of award credits that have been redeemed in exchange for awards, relative to the total number
expected to be redeemed.

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8 If a third party supplies the awards, the entity shall assess whether it is collecting the consideration allocated to the
award credits on its own account (ie as the principal in the transaction) or on behalf of the third party (ie as an agent
for the third party).

(a)

If the entity is collecting the consideration on behalf of the third party, it shall:

(i) measure its revenue as the net amount retained on its own account, i.e. the difference between the consider­
ation allocated to the award credits and the amount payable to the third party for supplying the awards; and

(ii) recognise this net amount as revenue when the third party becomes obliged to supply the awards and entitled
to receive consideration for doing so. These events may occur as soon as the award credits are granted.
Alternatively, if the customer can choose to claim awards from either the entity or a third party, these events
may occur only when the customer chooses to claim awards from the third party.

(b) If the entity is collecting the consideration on its own account,

it shall measure its revenue as the gross
consideration allocated to the award credits and recognise the revenue when it fulfils its obligations in respect
of the awards.

9 If at any time the unavoidable costs of meeting the obligations to supply the awards are expected to exceed the
consideration received and receivable for them (ie the consideration allocated to the award credits at the time of the
initial sale that has not yet been recognised as revenue plus any further consideration receivable when the customer
redeems the award credits), the entity has onerous contracts. A liability shall be recognised for the excess in
accordance with IAS 37. The need to recognise such a liability could arise if the expected costs of supplying
awards increase, for example if the entity revises its expectations about the number of award credits that will be
redeemed.

EFFECTIVE DATE AND TRANSITION

10 An entity shall apply this Interpretation for annual periods beginning on or after 1 July 2008. Earlier application is
permitted. If an entity applies the Interpretation for a period beginning before 1 July 2008, it shall disclose that fact.

11 Changes in accounting policy shall be accounted for in accordance with IAS 8.

Appendix

Application guidance

This appendix is an integral part of the Interpretation.

Measuring the fair value of award credits

AG1

Paragraph 6 of the consensus requires the consideration allocated to award credits to be measured by reference to
their fair value, i.e. the amount for which the award credits could be sold separately. If the fair value is not directly
observable, it must be estimated.

AG2 An entity may estimate the fair value of award credits by reference to the fair value of the awards for which they

could be redeemed. The fair value of these awards would be reduced to take into account:

(a)

the fair value of awards that would be offered to customers who have not earned award credits from an initial
sale; and

(b) the proportion of award credits that are not expected to be redeemed by customers.

If customers can choose from a range of different awards, the fair value of the award credits will reflect the fair
values of the range of available awards, weighted in proportion to the frequency with which each award is
expected to be selected.

AG3

In some circumstances, other estimation techniques may be available. For example, if a third party will supply the
awards and the entity pays the third party for each award credit it grants, it could estimate the fair value of the
award credits by reference to the amount it pays the third party, adding a reasonable profit margin. Judgement is
required to select and apply the estimation technique that satisfies the requirements of paragraph 6 of the
consensus and is most appropriate in the circumstances.