IFRScommunity.com

Hi,
I am struggling to determine how to record an accrual for a vendor rebates that will be received at a later stage.

For customer rebates, accounting is clear for me: At the same of the sale I would accrue for rebates as follows:

Dt Sales Reduction (Contra Revenue account in the P&L)
Ct Accrual for Customer rebates (Liability account in the BS).

However for Vendor rebates.... would it be something like :

Dt Accrual for Vendor rebates (Asset account in the BS ??)
Ct Expense (P&L account where the original purchase was recorded)

It looks strange to me to accrue using an asset account but it is also strange to me to debit a liability account….
I have no a real case here , just trying to figure out the accounting of a basic scenario

Thanks in advance

I thought it was a bit of a grey area for the 'opposite' side of certain revenue arrangements. So a suitable accounting policy is needed. In your scenario are you already entitled to the rebate as at year end, or projecting forward and expecting to receive a later credit due to volume discounts etc?

general offsetting criteria apply:

https://ifrscommunity.com/knowledge-bas ... struments/

how will you settle the rebates? i.e. by paying less for the 'principal' amount, or will you settle them at a later date?

If we purchase more 100’000kg of material in current year, vendor will issue a credit note in the first quarter of the following year for the annual rebate.
I understand that if expectation is that we won’t reach the 100’000kg , we do not need to accrue for the vendor rebate all along the current year but what if we believe we will?

these are two separate issues, i.e.
1. whether to accrue the rebates:
https://ifrscommunity.com/knowledge-bas ... nd-rebates

2. whether to offset the resulting asset (receivable) and 'principal' payable
https://ifrscommunity.com/knowledge-bas ... struments/

So :
1. We can accrue for vendor rebates and we use a receivable account
2. We cannot offset the receivable and the liability becuase settlement won t occur simmultaneously : Liability is settled during current year based on invoices payment terms and Receivable is settled the 1st quarter of the following year.
Is it correct?

yes

Thanks!