How to account for loyalty points (IFRS 15 and ASC 606)
Resources · Finance
Under IFRS 15 and ASC 606, loyalty points that give customers a material right are a separate performance obligation: part of the sale price is allocated to the points, recorded as deferred revenue (a contract liability) and recognized when the points are redeemed or expire, taking expected breakage into account. A double-entry loyalty ledger, such as Qurable Loyalty Ledger, keeps the issuance, redemption and expiration data this accounting needs.
- Sale priceUSD 100
- Revenue for the productUSD 92.59
- Deferred for the pointsUSD 7.41
The rest is recognized on redemption or expiry. Not accounting advice.
In production · October 2026
In production, at the scale of millions of movements.
Qurable manages 18M members today. Each program has its own vault, rules and liability, isolated by organization.
- 11M+Transactions recordedIn a single production environment
- 22M+Double-entry movementsEach with its counterpart
- ~20 msMember history lookupAverage query time
- 18MMembersIn programs running on Qurable
Key takeaways
- Under IFRS 15 and ASC 606, points are a separate performance obligation and part of the revenue is deferred.
- Deferred revenue is recognized when points are redeemed or expire, taking expected breakage into account.
- Auditors check whether program data is complete, accurate and reconcilable with the accounting records.
Two approaches
Accrue the cost of the reward or defer part of the revenue.
Some earlier practices and local standards only accrued the expected cost of redemption. IFRS 15 and ASC 606 treat points as something the customer paid for, so part of the sale's revenue is deferred.
| Incremental cost accrual | Deferred revenue (IFRS 15 / ASC 606) | |
|---|---|---|
| When points are issued | All sale revenue is recognized, plus an accrual for redemption cost | Part of the sale price is allocated to the points and deferred |
| What the liability measures | The expected cost of delivering rewards | Revenue allocated to points not yet redeemed |
| At redemption | The accrual is used | The matching deferred revenue is recognized |
| Breakage | Reduces the accrual | Recognized in proportion to redemptions, when it can be reliably estimated |
| Data it requires | Points balance and reward costs | Batches, originating sale, redemptions, expirations and a documented breakage estimate |
The data accounting needs
What accounting needs from the platform.
Applying IFRS 15 or ASC 606 to a points program takes data that many platforms do not keep. These are the items to confirm before the first close.
| Data | What accounting uses it for |
|---|---|
| Double-entry records | Every issuance, redemption, expiration and reversal with its counterpart, to rebuild the deferred balance. |
| Corrections through offsetting entries | An error must not erase history: auditors need to see the original movement and its correction. |
| Issue and expiration date per batch | To know when each part of deferred revenue expires and to estimate breakage by cohort. |
| Consumption order | FIFO, FEFO or LIFO decides which batch is redeemed first and, with it, which deferred revenue is recognized. |
| Which purchase generated each issuance | To allocate the sale price between the product and the points. |
| Points without a purchase | Separate bonus or campaign points, which do not come from a sale and may be treated differently. |
| Amount and currency of each redemption | To recognize revenue and reconcile with reward costs. |
| Who delivers the reward | If a partner delivers it, the principal-versus-agent analysis changes. |
| Country and currency of each movement | To record deferred revenue in the entity that issued the points. |
| Daily export | Movements in the data warehouse, to reconcile with the general ledger. |
How it works
Five steps, from the sale to revenue.
A simplified, illustrative example: a USD 100 sale that awards 1,000 points. The numbers do not come from any real program, and the final treatment is set by your accounting team and auditor.
Step 1
Identify the obligation
If the points give the customer a material right they would not get without buying, they are a performance obligation separate from the sale.
- Example
- The sale delivers the product and 1,000 points.
Step 2
Estimate the points' price
The standalone selling price of the points is estimated from their redemption value, adjusted for the likelihood they will be redeemed.
- Example
- 1,000 × USD 0.01 × 80% expected redemption = USD 8.
Step 3
Allocate the price
The sale price is split between the product and the points based on their relative standalone selling prices.
- Example
- Points: 100 × 8 ÷ 108 = USD 7.41 deferred. Product: USD 92.59.
Step 4
Recognize at redemption or expiration
Deferred revenue is recognized as points are redeemed, in proportion to expected redemptions, or when they expire.
- Example
- 400 of 800 expected points are redeemed: 50%, or USD 3.70, is recognized.
Step 5
Review breakage
At every close, the breakage estimate is checked against actuals and the remaining recognition is adjusted.
Audit
What auditors usually review in a points program.
Beyond the standard itself, an audit focuses on whether program data is complete, accurate and reconcilable with the books.
That the records balance
Points issued, redeemed, expired and outstanding tie out to each other every period.
The breakage assumption
How it was estimated, from what history and how far it drifted from actual expirations.
Period cutoff
Redemptions and expirations land in the right period, especially around the close.
Manual adjustments
Who can make them, who approves them and where the trail is kept.
General ledger reconciliation
The program's deferred balance matches what is recorded in the books.
With Qurable
The data accounting asks for, in a ledger you can audit.
Qurable does not set your accounting policy. It records every point in a double-entry ledger, with batches, traceability and export, so your team can apply the standard with complete data.
Hash-chained double-entry ledger
Every movement with its counterpart, chained by hash and with automated reconciliation audits.
See the points ledgerBatches and expirations
Each credit is a batch with an issue and expiration date, consumed FIFO, FEFO or LIFO, under versioned rules.
See batches and expirationsAdjustments with dual approval
Role-based permissions and maker-checker on manual adjustments; history is never edited, only offset.
See the points programEach partner's contribution
The ledger records each party's contribution to co-funded campaigns; entries and clearing are handled from the Manager. Qurable does not move funds.
See the loyalty coalition
FAQ
What people ask about loyalty accounting.
Short, general answers for accounting and finance teams. They do not replace your auditor's view.
If points give the customer a material right, they are a separate performance obligation. Part of the sale price is allocated to the points and deferred until they are redeemed or expire. ASC 606 follows a similar model in the United States. This guide is not accounting advice.
On a relative standalone selling price basis. You estimate the points' price (redemption value adjusted for the likelihood of redemption) and split the sale price between the product and the points. Illustrative example: on a USD 100 sale with points valued at USD 8, USD 7.41 is deferred.
As members redeem, in proportion to expected redemptions, or when the points expire. Until then, the revenue allocated to the points sits as a contract liability, which many companies call the program's deferred revenue.
On redemption, the share of deferred revenue tied to those points is recognized as revenue and the cost of the reward delivered is recorded; if a partner delivers the reward, so is the amount owed to it. Qurable Loyalty Ledger stores each redemption with its amount and currency for reconciliation. This is not accounting advice.
If the company expects to be entitled to breakage and can estimate it reliably, it recognizes expected breakage in proportion to redemptions. If not, it recognizes it when the likelihood of redemption becomes remote. The estimate is reviewed at every close against actual program history.
It depends on what it delivers. If a rewards club, benefits program or, in Latin America, a club de beneficios gives discounts applied on the same purchase, there is generally no future right to defer. If it accumulates redeemable points or miles, there is. Confirm with your auditor.
You need to assess whether the company acts as principal or agent in that redemption. As an agent, it generally recognizes only its margin or fee as revenue, not the full value of the reward. That is why it helps to record who delivered each reward and each party's contribution.
Double-entry ledger movements, with batches, issue and expiration dates, the amount and currency of each redemption and each partner's contribution, exported daily to the data warehouse. Your team and auditor set the accounting policy and how it is applied.
Last reviewed
Further reading
Keep reading about program finance.
Pages that explain each piece of data accounting relies on.
- ResourceLoyalty points liability
How to measure it by currency, country and expiration.
- ResourceLoyalty point value: how to calculate it
The basis for estimating the points' standalone selling price.
- ResourceLoyalty breakage
How it is estimated, cohort by cohort.
- ModulePoints ledger
Double entry, batches and an auditable history.
- ModulePoints program
Earn, redemption and expiration rules.
Review the data your close needs, with our team.
In a 45-minute technical session we show you the ledger, batches and movement export, with a case like yours.