Future-purchase discounts: when part of today's sale belongs to tomorrow
A coupon earned on today's purchase can mean part of today's price pays for a future discount. Under UK-adopted full IFRS for 2026 annual periods, without early adoption of IFRS 18, that only happens when the option gives the customer a material right they would not otherwise receive. The seller then estimates the option's stand-alone price, allocates part of the current consideration to it and defers that part.
Test whether the option is a material right
Coupons, award points, renewal discounts and other options for free or discounted goods are common. Under IFRS 15 an option is a separate performance obligation only if it gives the customer a material right they would not receive without entering the original contract. An example is a discount that is incremental to the range of discounts normally given for those goods to that class of customer in that market.
An option to buy at the stand-alone selling price creates no material right, even if access depends on an earlier purchase. That is a marketing offer, accounted for when exercised. So not every coupon or membership discount defers revenue, and a free loyalty membership does not by itself show that a purchase created a paid-for right. The question is what this contract gives against the actual baseline of customary discounts. FRS 102, IFRS for SMEs, US GAAP and tax treatment are outside this analysis.
Price the option, not the coupon's face value
If the option's stand-alone selling price is not directly observable, the seller estimates it. The estimate reflects the discount the customer would receive on exercise, adjusted for any discount available without the option and for the likelihood that the option will be exercised. The transaction price is then allocated between the current goods and the option on relative stand-alone selling prices.
The coupon's face value is therefore not the liability, and neither is the option's estimated stand-alone price. The liability is the share of the current price allocated to the option. Any exercise rate used needs support from the seller's own evidence; IFRS 15 does not prescribe one.
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Worked hypothetical: a £60 coupon on a £100 sale
The following facts and amounts are hypothetical, in GBP and excluding VAT and other taxes. A customer pays £100 for goods with an observable stand-alone selling price of £100 and obtains control now. The purchase earns a coupon for £60 off one additional £200 purchase within a stated window, not redeemable for cash. This customer would ordinarily get a £10 discount on that future purchase without the coupon, so only £50 is incremental. A supportable estimate at inception puts the likelihood of exercise at 50%, a rate invented for this example. All contract criteria are met and the incremental right is assumed material. There is no financing, return right or early breakage release.
The option's estimated stand-alone price is (£60 - £10) × 50% = £25, so total stand-alone prices are £100 + £25 = £125. The current goods receive £100 × £100 / £125 = £80 and the option receives £100 × £25 / £125 = £20. The initial entry is Dr bank £100, Cr revenue £80, Cr contract liability £20.
| Item | Calculation | Amount |
|---|---|---|
| Coupon face value | Contract term | £60 |
| Discount available without the coupon | Customary baseline | £10 |
| Estimated option stand-alone price | (£60 - £10) × 50% | £25 |
| Revenue on current goods | £100 × £100 / £125 | £80 |
| Contract liability for the option | £100 × £25 / £125 | £20 |
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Release the allocation on redemption or expiry
The amount allocated to a material right becomes revenue when the future goods transfer or when the option expires. If the customer redeems the coupon on a qualifying £200 purchase, they pay £200 - £60 = £140. When those goods transfer, revenue is £140 new cash plus the £20 released allocation, £160: Dr bank £140, Dr contract liability £20, Cr revenue £160. Across both purchases cash is £240 and revenue is £80 + £160 = £240. Costs sit outside this allocation-only example.
In the alternative outcome the coupon expires unused, with no continuing performance and no refund or remittance obligation. The seller records Dr contract liability £20, Cr revenue £20, and total revenue from the original £100 is £100. Redemption and expiry are alternatives, not cumulative entries.
This single-coupon example does not model a loyalty scheme. Paragraphs B44 to B47 deal separately with unexercised rights and breakage, and paragraph B43 offers a practical alternative for qualifying renewals of similar goods or services on the original terms, which the example does not apply.
For each scheme, record the discount a customer could get without the qualifying purchase, the incremental amount, the support for the exercise estimate, the allocation and the redemption or expiry evidence that triggers release.
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