Financial Accounting Standards Board Essay

running Discount (Runway), a privately held online retailer, has utilize a new customer confer withral marketing campaign. The campaign involves incentivizing current customers to refer their friends to Runways website. When a current customer refers someone who makes a purchase on Runways website, the referring customer receives a $25 credit to be applied to a future purchase. Two authorized provisions should be highlighted regarding this Refer-a-Friend chopineThe $25 credit is contingent upon the existent customers referral actually making a purchase The $25 credit is applied to the referring customers future purchase at the time that the referred customer makes a purchaseThe business purpose of this Refer-a-Friend program is to increase sales and expand Runways customer al-Qaida by providing incentives for current customers to refer their friends.The first news report issue associated with Runway Discounts Refer-a-Friend program is identifying how the $25 referral credit sh ould be save in Runways income statement. Is this consideration an adjustment of the selling prices of the traffickers products or services, and hence characterized as a reduction 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 monumental ciphering 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 leave alone discuss the possible accounting treatments under U.S GAAP and IFRS, which relate to these accounting issues facing Runway Discount. Relevant examples will be provided of businesses that offer sympathetic referral incentive programs. We will conclude with our recommendation of how Runway Discount should account for the referral cred its it issues relating to its Refer-a-Friend program.Applicable Authoritative LiteratureFASB Accounting Standards Codification (ASC) 605-50, tax revenue Recognition IASC International Accounting Standards (IAS) 18, Revenue RecognitionView as multi-pages