An IFRS Decision Heuristic—A Model for Accounting for Credit Card Rewards Programme Transactions

Sophia M. Brink () and Gretha Steenkamp
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Sophia M. Brink: Department of Economic and Management Sciences, Stellenbosch University, Stellenbosch 7600, South Africa
Gretha Steenkamp: Department of Economic and Management Sciences, Stellenbosch University, Stellenbosch 7600, South Africa

JRFM, 2023, vol. 16, issue 3, 1-17

Abstract: Guidance on the appropriate accounting treatment of a credit card rewards programme (CCRP) transaction after the effective date of IFRS 15 is needed due to current uncertainty and inconsistencies. The objective of the research was to develop a theoretical model for the accounting treatment of CCRP transactions after the effective date of IFRS 15 by considering the relevant literature, including IFRS. This non-empirical qualitative literature study utilised document analysis and model building to construct the theoretical model. To provide practical guidelines in accounting for a CCRP transaction, a model embedded in a decision tree was developed as a heuristic to provide for various possible accounting treatments. It was found that a CCRP transaction can be accounted for in terms of IAS 37 Provisions, Contingent Liabilities and Contingent Assets (as an expense and provision), in terms of IFRS 9 Financial instruments (as an expense and financial liability), or in terms of IFRS 15 Revenue from contracts with customers (as a deferred revenue). The value of this article is that it provides answers in a clear and concise matter on a single page dealing with all the various elements of a CCRP transaction that impacts the accounting treatment. The CCRP theoretical model developed could eliminate uncertainty amongst CCRP management and increase the decision-usefulness of financial information.

Keywords: credit card rewards programme; IFRS 15; theoretical model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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