Revenue – ifrs 15 handbook

Example 10A – Customer loyalty points programme: Increase in 
estimated redemptions
IFRS 15.IE267–IE270
Retailer C offers a customer loyalty programme at its store. Under the 
programme, for every 10 that customers spend on goods they are rewarded 
with one point. Each point is redeemable for a cash discount of 1 on future 
purchases. C expects 97% of customers’ points to be redeemed. This estimate 
is based on C’s historical experience, which is assessed as being predictive 
of the amount of consideration to which it will be entitled. During Year 1, 
customers purchase products for 100,000 and earn 10,000 points. The stand-
alone selling price of the products to customers without points is 100,000.
The customer loyalty programme provides the customers with a material right, 
because the customers would not receive the discount on future purchases 
without making the original purchase. Additionally, the price that they will pay on 
exercise of the points on future purchases is not the stand-alone selling price of 
those items.
Because the points provide a material right to the customers, C concludes that 
the points are a performance obligation in each sales contract – i.e. the customers 
paid for the points when purchasing products. C determines the stand-alone 
selling price of the loyalty points based on the likelihood of redemption.
C allocates the transaction price between the products and the points on a 
relative selling price basis as follows.
Performance 
obligation
Stand-alone 
selling 
prices
Selling 
price ratio
Price 
allocation Calculation
Products
100,000
1
91%
91,000 (100,000 × 91%)
Points
9,700
2
9%
9,000 (100,000 × 9%)
Total