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Sales Rebates: Do you reduce sales or increase cost of goods?

Where do you book sales rebates? Customer will get 1% rebate on all sales over x amount. Should this reduce sales or be part of cost of goods. Up until now, these rebates have been smaller, but in 2016 could be very large. What is the best practice. Thanks!

Answers

Randy Moore
Title: CFO
Company: SJB Bagel Makers
(CFO, SJB Bagel Makers) |

Volume rebates are a reduction to sales.

Gudmundur Atlason
Title: Revenue Manager
Company: YuMe
(Revenue Manager, YuMe) |

Rebates are sales incentives and should be accounted for as reduction of revenue. Please refer to FASB ASC 605-50 "Revenue Recognition: Customer Payments and Incentives"

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