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How to account for Sales and use tax rebate received from the city

How to account for Sales and use tax rebate received from the city as an incentive for office relocation. Is this an ordinary income to be included in Operating Revenue or is it an extraordinary income and should be shown in other income.


Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Not sure about the details of the incentive program and the timing of receipt but It is a "rebate". At face value, contra Sales and Tax Use Expense. In the off chance that the money is given upfront, then Deferred Income to be amortized to reduce Sales and Tax Use Expense until initial amount goes to zero.

Stephen Turk
Title: Principal
Company: Stephen Turk, CPA
(Principal, Stephen Turk, CPA) |

Revenues are "inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations." A sales and use tax rebate is not revenue as defined and should not be included in revenue.
There's not a lot of US GAAP guidance relating to government grants and subsidies, but the issue has been addressed by the AICPA and the IASB (which is considered nonauthoritative guidance for US GAAP). Bottom line is that you should deduct the rebate from the related expense. That is, deduct it from the office relocation expenses (moving costs, etc.). If the rebate exceeds the direct relocation costs, or continues for some period, deduct it against the office lease costs.

(Controller) |

Thanks. I read through the IAS 20 Accounting for government grants as well. It is consistent with your reply.


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