Your local supermarket recently introduced a customer loyalty program. For each dollar you spend on groceries, you get one point. If you earn 800 points and redeem them, the supermarket will give you a $5 rebate when you pay for your groceries. If you wait a bit longer and accumulate 2,000 points, you will get a $15 rebate when you redeem the points. Or, if you can accumulate 6,500 points and redeem them, you would get a $50 rebate.
Instructions
With the class divided into groups, assign a debate position for each of the following issues:
(a) Should unredeemed customer loyalty points be recorded as a current liability by the super market-yes or no? Refer to the conceptual framework and elements of financial statements in your answer.
(b) Assuming your answer to (a) is "yes," identify the factors the super market would need to consider when calculating the cost of the customer loyalty points. If your answer to (a) is "no," identify where unredeemed customer loyalty points should be recorded, if at all.
(c) Discuss whether a company should administer a customer loyalty program or not. Identify the advantages and disadvantages. What other alternatives are there?