Sally Inc. (the "Company") manufactures needles used to inflate and deflate sporting equipment (e.g., footballs, basketballs, soccer balls). The Company produces high-quality stainless steel needles at a price of $7 per needle.

To incentivize customers to purchase its needles, the Company utilizes a customer loyalty program (the "Program") that rewards customers with one loyalty point per dollar spent. Customers can enjoy a $1 credit on future needle purchases for every 25 points redeemed.

Assume that the loyalty points are expected to accumulate to an amount that could provide a customer a discount on future purchases that is significant relative to discounts provided to customers that did not participate in the loyalty program.

Facts are as follows:

Customers can join the Program for no monetary cost, but must provide an e-mail address.

Customers earn zero points for purchases that are paid partially or fully through redemption of points.

Historically, 95 percent of the points earned under the Program are redeemed.

The Company only manufactures one style of needle and recognizes revenue upon shipment.

Costs to acquire a customer and commissions associated with a sale are both zero.

Collection of all invoiced amounts is deemed probable. On January 1, 2018, the Company enters into a contract with Gary Inc. to provide 20,000 needles for a price of $140,000. By joining the loyalty program, Gary will earn 140,000 loyalty points worth $5,600 ($140,000 25). The Company ships all 20,000 needles to Gary on January 15, 2018.

1. Do the loyalty points represent a performance obligation? How do you know?

2. Per IFRS, do the loyalty points represent a performance obligation? How do you know?

3. Assume the loyalty program is structured such that it gives rise to a material right; what then would be an appropriate stand-alone selling price of the loyalty points? How do you know?

4. What entry/ies should the Company record upon shipping the 20,000 needles to Gary?

On August 1, 2018, Gary redeems 14,000 loyalty points and receives 80 needles. As of August 1, 2018, the Company still believes that 95 percent of the total points Gary earned will ultimately be redeemed.

5. What entry/ies should the Company record for the 80 needles shipped on August 1, 2018?

On December 1, 2018, Gary redeemed 35,000 loyalty points and ordered 200 needles. Upon receiving the order for 200 needles on December 1, 2018, the Company updates its estimate of redemption to 99 percent (for a total additional expected redemption of 89,600 points).

6. What entry/ies should the Company record for the needles shipped on December 1, 2018?