29 October 2020
In the case of Lump Sum Incentive received from the Supplier on purchase, what is the right accounting method for its revenue recognition?
1. On receipt of the amount, can the full amount be recognized as income at point of receipt? or 2. The incentive to be reduced from the cost of stock or 3. The incentive received to be deferred in the form of provision and recognize as income in proportion to future sale of the stock items or else.
Assume: (a) the money used for the purchase is financed which used to repay by using sale proceeds and (b) incentive calculation formula/structure can be known only at a later time when the money is received.
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