115Paragraph 10B is added as follows:

115 Paragraph 10B is added as follows:

10B AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13, issued in September 2011, amended paragraphs 6 and AG1–AG3. An entity shall apply those amendments when it applies AASB 13.

116 In the Application Guidance, paragraphs AG1–AG3 are amended as follows (new text is underlined and deleted text is struck through):

AG1 Paragraph 6 of the consensus requires the consideration allocated to award credits to be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately. If the fair value there is not directly observable a quoted market price for an identical award credit, it fair value must be estimated measured using another valuation technique.

AG2 An entity may estimate measure the fair value of award credits by reference to the fair value of the awards for which they could be redeemed. The fair value … :

(a) the … initial sale; and

(b) the proportion of award credits that are not expected to be redeemed by customers.; and

(c) non-performance risk.

If customers can choose from a range of different awards, the fair value of the award credits will reflects the fair values of the range of available awards, weighted in proportion to the frequency with which each award is expected to be selected.

AG3 In some circumstances, other estimation valuation techniques may be available used. For example, if a third party will supply the awards and the entity pays the third party for each award credit it grants, it could estimate measure the fair value of the award credits by reference to the amount it pays the third party, adding a reasonable profit margin. Judgement is required to select and apply the estimation valuation technique that satisfies the requirements of paragraph 6 of the consensus and is most appropriate in the circumstances.

117 In the Illustrative Examples accompanying Interpretation 13, paragraphs IE1 and IE3 are amended as follows (new text is underlined and deleted text is struck through):

IE1 A grocery retailer operates a customer loyalty programme. It grants programme members loyalty points when they spend a specified amount on groceries. Programme members can redeem the points for further groceries. The points have no expiry date. In one period, the entity grants 100 points. Management estimates measures the fair value of groceries for which each loyalty point can be redeemed as 1.25 currency units (CU1.25). This amount takes into account an management’s estimate of the discount that management market participants would assume when pricing the award credits. That discount takes into account market participants’ expectations of the discount that expects would otherwise be offered to customers who have not earned award credits from an initial sale. In addition, management estimates that market participants would expects only 80 of these points to be redeemed. Therefore, the fair value of each point is CU1, being the fair value of the award for each loyalty point granted of CU1.25 reduced to take into account points not expected to be redeemed ((80 points/100 points) × CU1.25 = CU1). Accordingly, management defers recognition of revenue of CU100. Throughout the example, management determines that non-performance risk has an immaterial effect on the measurement of its obligation under the programme.