Loyalty Program Liabilities: Definitions & Recommendations
When you launch a points-based loyalty program, you’re creating a micro-economy with its own currency, market dynamics, and—most importantly from a legal standpoint—liabilities. Because these points can have monetary value that’s realized at the time of redemption, companies must defer revenue to cover these costs.
In this post, Oracle CrowdTwist Senior Strategist Carly Mathews reviews key terms and definitions from the Financial Accounting Standards Board’s lengthy guidance on loyalty program accounting, including:
- Points issued
- Points burned
- Outstanding points
- Redemption rate
- Cost per point
With an understanding of all of those terms, you’re then able to calculate your loyalty program liability.