I currently show a revenue line on my income statement line for "Vendor rebates." I see GAAP guidance that VENDORS should record rebates as a reduction in their sales prices, but how should those of us receiving them record them? Should I offset my COGS by the rebate received, or just show it as its own revenue account?
Where should a vendor rebate I receive go on my income statement? Revenue or COGS reduction?
Looks like EITF 02-16 is the guidance you are looking for. If I am reading it correctly, it should be a reduction of cost. You will want to read the literature yourself for your specific facts and circumstances. Good luck!
That does seem to be a very helpful pointer, though I find the language used in EITF 02-16 is challenging to translate into my particular circumstances since I don't consider the amounts involved to be reasonably estimable. If they were, it appears they should simply be reasonably estimated and used to offset my cost of sales. Since they are not reasonably estimable, I'm not so clear on how to handle them since they typically relate to transactions I'd closed 3-9 months ago.
My practice was always a COGS offset and that practice passed audit muster.
I agree with Linda. I match it to offset the cost incurred. Since it doesn't represent a product sold or service provided (your source of revenue) I would not record it as such.
These rebates should be a reduction of COGS or more specifically, a reduction in costs where you have the vendors invoices charged. We have had multiple audits and have had no issues with this treatment.
This depends on if the vendor issues a 1099 treating it as income. We have to show ours as income because we are issued a 1099.
In reading through these responses, I wanted to be sure I am understanding correctly. If we receive a rebate from a vendor we made a purchase from, we should record the value of that rebate in the same account (as a credit) the purchase was coded to, correct? This makes sense to me if the rebate was in check form (because I can clearly see the debit would be to cash). What happens when the rebate sent is in the form of a prepaid MasterCard? What is the other half of the entry? What happens when the card is used to make new purchases (perhaps from another GL account)? At what point am I recording the receipt of the rebate/subsequent purchase? Would it all be recorded at the same time (all via journal entry, I assume)?
The Prepaid MasterCard will be like any other asset (cash or cash like) account. You have to create another GL account for it to record debits and credits. You record receipt as the money become available for use.
Could we just call this account Vendor Rebates?
So, here are my journal entries to record the receipt of the Prepaid MasterCard (Rebate rec'd by vendor) and the subsequent use of the Prepaid MasterCard. Please let me know if I am incorrect.
Initial Receipt of card:
Debit Asset Account: Vendor Rebates
Credit Expense Account: Where original rebate qualifying purchase was coded
Use of card:
Debit Expense Account: Where new purchases are to be coded
Credit Asset Account: Vendor Rebates
If in the future a vendor were to send us a rebate in check format, the difference is that the check would be debited to cash and credited to the original purchase and there would be no need for the second entry, correct?
Can you please suggest, how to account for rebates received not from the distributor but from the manufacturer? In case the distributor rebates, we usually get a credit memo and post it directly on materials purchased from this vendor affecting COGP.
But how can I account for a rebate received from the manufacturer where we don't have any outstanding A/P balance to decrease? If i issue invoice in this case to receive the rebate i can not distribute the credit to purchased materials. Can someone provide feedback on this please?
How do you all treat "cash back" rebates from credit cards that are not directly related to a particular expense line?