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What would the liability be at Dec

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Question - Relax Inc. provides massage therapy services to scustomers. They started a special promotion on Jan 1, 2020 whereby they when they buy 10 massage services, they receive one massage service free. A customer pays $75 for a massage. It is estimated that only 50% of customers will redeem the free massage. 20,000 massages were sold in 2020 under this program. Customers redeemed 250 free massages in 2020 and the rest are expected to be redeemed in 2021 (original redemption rate estimate still valid).It costs RELAX $40 to provide a massage to a customer.

a) What would the liability be at Dec 31, 2020 for Relax for the unreemed massages under this promotion assuming the revenue approach is used to value the liability?

b) If INSTEAD, the expense approach was used for the unredeemed massages, what would the liability for Relax be at Dec 31, 2020 instead?

c) Which of the above methods is perferred for this type of program under IFRS? Under ASPE? WHY?

Reference no: EM132999840

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