Financial Accounting Standards Board Essay

course Discount ( trail), a privately held online retailer, has implemented a newfound node tinctral marketing campaign. The campaign involves incentivizing veritable guests to refer their friends to Runways website. When a current customer refers someone who makes a get on Runways website, the referring customer receives a $25 credit rating to be applied to a eon to come purchase. Two important provisions should be highlighted regarding this Refer-a-Friend programThe $25 credit is dependent on(p) upon the existing customers referral truly making a purchase The $25 credit is applied to the referring customers future purchase at the eon that the referred customer makes a purchaseThe line of merchandise purpose of this Refer-a-Friend program is to increase sales and expand Runways customer base by providing incentives for current customers to refer their friends.The first billhooking system issue associated with Runway Discounts Refer-a-Friend program is identifying how the $25 referral credit should be recorded in Runways income statement. Is this consideration an limiting of the selling prices of the vendors products or services, and thus characterized as a decrement of revenue, or is it a cost incurred by the vendor for assets and services received from the customer, and therefore characterized as a cost or expense? The next significant accounting issue is regarding when Runway should record the $25 referral credit as a liability (a) at the time an existing customer receives the $25 referral credit, or (b) at the time the existing customer actually uses the $25referral credit to make a purchase?In the following sections, we will discuss the possible accounting treatments under U.S generally accepted accounting principles and IFRS, which relate to these accounting issues facing Runway Discount. Relevant examples will be provided of businesses that bear similar referral incentive programs. We will dissolve with our recommendation of how Ru nway Discount should account for the referral credits it issues relating to its Refer-a-Friend program.Applicable Authoritative writingsFASB Accounting Standards Codification (ASC) 605-50, Revenue realization IASC International Accounting Standards (IAS) 18, Revenue realisationView as multi-pages