Credit note received after YE

[Auditsux]

How to deal with a credit note received lets say in FY24 but relates to a purchase I made in FY23? Do I need to adjust the FY23 figures with a provision? What are the journal entries required? Basically the opposite of a sale with right of return lol

[JRSB]

Most likely represents conditions at year end, eg incorrect pricing or volume etc, so is an adjusting event. Or is it because of decisions made/arising entirely after year end?

[Auditsux]

Hey,

its the first one.

[JRSB]

Are you an (unhappy) auditor? This is the same reason you would review post year end credit notes in revenue testing.

[Auditsux]

Yeah. Also tryna understand it from the client's sake when I decide to jump ships and move to industry.

[Auditsux]

Anyone who might know please let me know! I was thinking if we could recognise a contract asset and credit the expense? Would that be correct?

[Marek Muc]

What's the reason for issuing this credit note?

[Auditsux]

Hey,

incorrect pricing basically from the supplier's side! They overcharged.

[Marek Muc]

That's a trade receivable on the debit side, or you might need to adjust the trade payable if it's still unsettled at the reporting date. You credit the expense, or the inventory if the items haven't been sold. And this definitely isn't a contract asset.

[Auditsux]

Oh okay, thank you! I wasn't sure if i should decrease the trade payable since we haven't received the credit note as at year end.

[Marek Muc]

The credit note confirms the correct amount at the year-end.

[Auditsux]

I see. Just out of curiosity, if we received a refund in the following year due to exceeding the agreed level of custom in the prior year (discount basically) and not because of error the accounting treatment would be the same? Decrease trade payables at year end?

[JRSB]

If you knew you had achieved the volume for a discount and the invoices received were pre-discount, I'd recognise the discount in P&L with a corresponding adjustment to payables and then offset it when the credit note was subsequently received

[Marek Muc]

https://ifrscommunity.com/knowledge-bas ... nd-rebates