Question: 1 Do you think that the gross value method distorts

1. Do you think that the gross value method distorts earnings because it overstates revenue?
2. The total cash that the company receives is the same regardless of the method the company uses to report revenue. So, is one revenue recognition method just as good as any other?

Following the pattern of many other countries Canada converted from domestic GAAP to International Financial Report Standards (IFRS). The changeover occurred on January 1, 2011. As a result of the conversion to IFRS, the revenue recognition policies of many Canadian retail operators that offered customer reward programs had to change. Previously, there were no clear guidelines concerning loyalty programs, and so many retailers recorded their sales at gross value rather than at net. For example, assume a customer makes purchases of $200 and earns $2 of reward points that can be redeemed at a later date.

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