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Premium Expense and Liability Accounting

The document outlines accounting practices for premium expenses, cash rebate programs, cash discount coupons, and warranty liabilities under IFRS 15 and PAS 37. It details the recognition and measurement of estimated liabilities and expenses associated with customer loyalty programs and warranty provisions. Journal entries for recording these transactions are also provided for clarity in financial reporting.

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Ashryle Salazar
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11 views1 page

Premium Expense and Liability Accounting

The document outlines accounting practices for premium expenses, cash rebate programs, cash discount coupons, and warranty liabilities under IFRS 15 and PAS 37. It details the recognition and measurement of estimated liabilities and expenses associated with customer loyalty programs and warranty provisions. Journal entries for recording these transactions are also provided for clarity in financial reporting.

Uploaded by

Ashryle Salazar
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Premium expense xx - award credits as a separate component

Estimated premium liability of initial sale transaction.


- granting of award credits is effectively
accounted for as future delivery of
Cash Rebate Program
goods or services.
- common variation of a premium offer
Stand alone selling price – price which an entity
- estimated amount of cash rebate is
would sell a promised good or service separately to
recognized both expense and estimated
a customer.
liability in period of sale.
Journal Entries:
Journal Entries:
a. Recognize
a. Recognize cash rebate program
Cash
Rebate expense
Sales
Estimated rebate liability
Unearned revenue – points
b. Record payments to customers
b. Redemption
Estimated rebate liability
Unearned revenue – points
Cash
Sales
Cash discount coupon
Third party operates loyalty program
- popular marketing tool
Journal Entries:
- estimated amount of cash rebate is
recognized both expense and estimated a. Recognize
liability in period of sale.
Cash
Journal Entries:
Sales
a. Recognize cash discount coupon
Revenue from points
Cash discount coupon expense
Estimated coupon liability b. Record payments to airline
b. Record payments to retailers Loyalty program expense
Estimated coupon liability Cash
Cash
Chapter 3: Warranty Liability
Customer loyalty program – IFRS 15
Warranty (PAS 37)
- to reward customers for past purchases and
to provide incentives for further purchases. - for appliances, to provide free repair service
- awarding of credits/points which is or replacement during a specified period if
redeemable. products are defective.

Measurement Recognition of warranty provision

- Fair value of consideration received a. Entity has present obligation, legal or


w/respect to initial sale shall be constructive by past event.
allocated between the award credits and b. Probable outflow of resources embodying
sale based on relative stand-alone economic benefits would be required to
selling price. settle obligation.

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