Accounting treatment for discount coupons

May 2004
Accountancy;May2004, Vol. 133 Issue 1329, p88
Trade Publication
This article addresses a question on whether a management of an entity that operates a chain of restaurants should recognize a provision for the distribution of discount coupons. According to advice, the management should not recognize any provision when it distributes coupons. A provision should only be recognized under International Accounting Standards 37, Provisions, Contingent Liabilities and Contingent Assets, when there is an obligating event. The restaurateur is not obliged to supply a free dessert until a main course has been purchased. Management should treat the cost of the dessert as a cost of sales when customers redeem the voucher. The revenue recognized will be the amount received from the customer. Revenue is not grossed up to include the sales price of the free dessert. The accounting treatment for the coupons is the same under both the International Financial Reporting Standards and the British Generally Accepted Accounting Principles.


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