IndAS Bank Reward points

Bank reward points earned:

We all know that credit and debit cards offer reward points based on their spending etc. there is possibly a new way to treat it. In the month of March 2021, ABC manufacturers received redeemable points worth 5,000₹.

By Bank (Reward points account) a/c 5,000₹

To SPLOCI-OCI a/c 5,000₹

(Being reward amount recognised in bank account and Reserves & Surplus account through OCI)

By Purchases 12,000₹

By SPLOCI-OCI 5,000₹

To discount a/c 5,000₹

To Reward points 5,000₹

To Payables a/c 7,000₹

(Beings goods purchased on credit and debited the reserve though OCI)

By Payables a/c 7,000₹

To Bank a/c 7,000₹

(Being payment settled)

Note: This transaction in the above order satisfies the balance sheet equation test.

Now, If the Reward points are expired without using them, then:

By SPLOCI-OCI 5,000₹

To Bank (Reward points) a/c 5,000₹

The only flaw is, it does not reflect the true form of transaction because when the discount is applied, the Assets side value 5,000₹ will reduce immediately as this kind of transaction usually happens and online. But, the transaction tallies only when Reserves are debited first. So I made these compound entries to make it work.

Please buzz me if you have any better entries.

Hi Yasaswi! Your approach is quite thoughtful, especially considering the complexities of reward points under IndAS. Here’s a breakdown and some alternative views on accounting for bank reward points under IndAS:

Your Proposed Entries Summary:

Reward points received credited to OCI (SPLOCI-OCI) — treating it as an equity reserve.
When using points for purchase, debit OCI and credit discount & reward points accounts.
Upon expiry of points, reverse the OCI entry.

A Few Observations & Alternative Suggestions:

1. Nature of Reward Points

Usually, reward points from banks are treated as discounts or rebates.
They do not represent income or equity — they reduce the purchase cost.
So, recognising reward points in Other Comprehensive Income (OCI) is uncommon.

2. IFRS / IndAS Perspective

Under IndAS 38 (Intangible Assets) or IndAS 18 (Revenue), reward points may be considered as a separate component of the transaction — a liability or reduction of expense.
If points are redeemable, they create a deferred liability until redeemed or expired.

3. Recommended Accounting Treatment

Event	Debit	Credit	Descripttion
Reward points credited by bank	Bank / Receivable	Deferred Income / Liability	Recognise value of points as a liability till redeemed
Purchase made using points	Deferred Income / Liability	Discount Allowed / Purchases	Apply reward points reducing purchase cost
Expiry of points (unused)	Deferred Income / Liability	Income (P&L)	Recognise expired points as income

This reflects the reward points as a liability when credited, reducing the expense when redeemed, and income when expired.

Sample Entries:

When points credited:

When redeemed against purchase:

If points expire unredeemed:

Why avoid OCI here?

OCI is typically for unrealised gains/losses or items excluded from P&L.
Reward points affect operating expenses and income — better reflected in P&L.
Also, treating it as a reserve can distort equity balances and does not represent true economic reality.

Summary

Treat reward points as deferred income / liability till redeemed or expired.
Reduce purchases by redeemed amount.
Recognise expired points as income in P&L.
This better aligns with matching principle and accurate financial representation.