Illustrative examples of accounting for simple swipe-only credit card rewards programmes

Orientation: The literature does not provide illustrative examples for simple swipe-only credit card rewards programme (CCRP) transactions. Research purpose: The study focused on developing and confirming illustrative examples of simple CCRPs after the effective date of International Financial Reporting Standards (IFRS) 15. Motivation for the study: Credit card rewards programme practitioners expressed a need for illustrative examples of accounting for CCRPs because of the lack of guidance provided in IFRS 15 and existing literature. Research approach/design and method: This qualitative study employed document analysis to develop illustrative examples, which were subsequently validated through the Delphi technique with input from 10 expert participants. The data were analysed using thematic analysis. Main findings: The illustrative examples developed included specific scenarios and amounts, which clearly indicated the journal entries to account for the initial recognition and derecognition of award credits in simple CCRP transactions. Specific complexities were addressed in the examples such as those related to derecognising award credits, including the principal versus agent consideration, the treatment of breakage when cardholders do not redeem all their award credits at once and a change in the estimated expected redemption rate over time. Practical/managerial implications: This study contributes to practice by offering illustrative examples that translate theoretical principles into practical application, thereby supporting CCRP management in accounting for these transactions and reducing associated uncertainty. Contribution/value-add: This additional guidance could ensure faithful representation of the underlying CCRP transactions, which will enhance comparability between companies, ultimately benefiting the users of financial statements.