Revenue – ifrs 15 handbook

Treatment of customer credit card arrangements
Credit card arrangements often include loyalty programmes that earn card 
holders certain benefits based on the use of their credit card. 
These arrangements require careful analysis to determine the appropriate 
accounting.
When all or part of a credit card arrangement is in the scope of the standard, 
the bank determines whether the loyalty programme gives rise to a separate 
performance obligation and what the nature of that performance obligation 
is. Customer loyalty programmes that give the customer accumulated rights, 
which can be used to purchase goods or services in the future at discounted 
prices, are generally accounted for as material rights under the standard. Under 
this approach, a portion of the consideration received for a transaction that 
earns the card holder these rights is deferred and recognised when the rights 
are exercised.

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282 | Revenue – IFRS 15 handbook
The challenge when accounting for these arrangements is identifying the 
revenue transaction that gives rise to the rights and, therefore, the transaction 
for which the bank defers a portion of the revenue. Entities may need to 
consider any annual card fees and also any interchange fees received when the 
customer enters into a transaction with a retailer that earns them their rights. 
The basis for potentially deferring a portion of interchange fees is that the entity 
may consider that, in substance, the interchange fee is paid by the customer. 
The other entities in the transaction remit the interchange fee to the bank and, 
therefore, are acting only as agents for the bank in the transaction. 
When the arrangement is considered outside the scope of the standard, 
entities treat the costs of operating these programmes as a marketing expense 
and provide for any liabilities arising from the arrangements in accordance with 
the provisions standard.