Revenue – ifrs 15 handbook

party. Programme members earn points for purchases made in 2018 in M’s 
stores and can redeem the accumulated points for goods supplied by either M 
or the third party until 31 December 2019.
At the end of 2018, M has recognised contract liabilities of 2,000, representing 
1,000 awards expected to be redeemed. In 2019, 500 awards are redeemed 
with the third party, 400 awards are redeemed directly with M and 100 awards 
expire without being redeemed. The third party invoices M 1.75 for each award 
redeemed by members and M determines that it acts as an agent when the 
third party supplies the awards. The cost of the inventory for the goods supplied 
for points redeemed directly with M is 600.
In 2019, M recognises a liability of 875 (500 × 1.75), derecognises the contract 
liabilities of 2,000 and recognises revenue of 1,125, which represents revenue 
of 800 (400 × 2) for awards redeemed directly, 125 (500 × 0.25) for awards 
redeemed through the third party and 200 (100 × 2) for lapsed awards.
Debit
Credit
Contract liabilities
2,000
Cost of goods sold
600
Revenue
1,125
Payable to third party
875
Inventory
600
To recognise revenue from loyalty programme 
in 2019

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10 Other application issues | 285
10.5 Customers’ unexercised rights (breakage)
| 
Amounts payable to third party loyalty programme operators 
When an entity participates in a loyalty programme operated by a third party, it 
may be required to pay the third party for:
– carrying out administrative tasks with respect to the programme; and
– assuming the obligation to supply the awards.
It appears that it is appropriate for the entity to recognise amounts payable 
to the third party for carrying out administrative tasks in profit or loss as an 
expense over the period in which the loyalty programme is in effect.
It appears that it is appropriate for the entity to recognise amounts payable to 
the third party for assuming the obligation to supply the awards when the third