Revenue – ifrs 15 handbook

109,700
100%
100,000
Notes
1. Stand-alone selling price for the products.
2. Stand-alone selling price for the points (10,000 × 1 × 97%).
During Year 2, 4,500 of the points are redeemed and C continues to expect 
that 9,700 points will be redeemed in total. C calculates the revenue to be 
recognised and the corresponding reduction in the contract liability as follows.
4,175 = 9,000 × 4,500 / 9,700 – i.e. price allocated to points multiplied by points 
redeemed in Year 2 divided by total points expected to be redeemed.
During Year 3, a further 4,000 points are redeemed. C updates its estimate, 
because it now expects 9,900 rather than 9,700 points to be redeemed. C 
calculates the revenue to be recognised and the corresponding reduction in the 
contract liability as follows. 
3,552 = (9,000 × (4,500 + 4,000) / 9,900) - 4,175 – i.e. price allocated to points 
multiplied by points redeemed in Year 2 and Year 3 divided by total points 
expected to be redeemed minus revenue recognised in Year 2.

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280 | Revenue – IFRS 15 handbook
Example 10B – Customer loyalty points programme: Decrease in 
estimated redemptions
Modifying Example 10A, assume that during Year 3 Retailer C updates its 
estimate and now expects 9,200 rather than 9,700 points to be redeemed. C 
calculates revenue to be recognised and the corresponding reduction in the 
contract liability as follows.
4,140 = (9,000 × (4,500 + 4,000) / 9,200) - 4,175 – i.e. price allocated to points 
multiplied by points redeemed in Year 2 and Year 3 divided by total points 
expected to be redeemed minus revenue recognised in Year 2. 
Example 11 – Airline customer loyalty points programme
Airline B offers the following customer loyalty programme. 
– Programme members earn one point for every 10 that they spend with B.
– Each point is redeemable for future goods and services with a value of 1: e.g. 
flights or consumer goods. 
– Loyalty points expire after 24 months if a programme member is inactive: i.e. 
if there is no increase or decrease in the member’s loyalty point balance. 
– B estimates the redemption rate of loyalty points at each reporting date 
based on its historical experience, which is assessed as being predictive of 
the amount of consideration to which B will be entitled. B’s current estimate 
is that 90% of loyalty points will be redeemed. 
B sells Customer C a ticket to fly from Singapore to Hong Kong for 1,000. C is a 
member of B’s customer loyalty programme.
The customer loyalty programme provides C with a material right because C 
would not receive the discount on future purchases by redeeming the points 
without buying the original air travel. Additionally, the price that C will pay on 
exercise of the points on its future purchases is not the stand-alone selling price 
of those items.
Because the points provide a material right to C, B concludes that the points 
are a performance obligation – i.e. C paid for the points when purchasing the 
air ticket. In determining the stand-alone selling price of the loyalty points, B 
considers the likelihood of redemption.
B allocates the transaction price between the air ticket and the points on a 
relative stand-alone selling price basis as follows.