We are looking for clarification on how to handle revenue recognition related to "interchange" revenue we receive from payments settled via our various bill payment credit card programs and a contingent rebate (% of the Interchange Revenue we receive) we provide back to our customers to incent them to maximize the volume of payments they pay through our Bill Payment solution. This customer incentive program is contingent on the customer doing various activities to promote this payment method with their vendors as well as being current will all fees (software and transction)that they may owe us related to our solutions. Ideally, we would like to recoginize this customer incentive rebate expense as a "
Recommended Revenue Recognition Treatment for Credit Card Incentive Rebate Programs
Answers
Michael - the GAAP guidance you are looking for is in ASC 605-50-45-2. If you have "received, or will receive, an identifiable benefit (goods or services) in exchange for the consideration" and "can reasonably estimate the fair value of the benefit identified" then some or all of the customer incentive may be marketing expense. Otherwise, it's a reduction in revenues.
A simple volume-based rebate would be a reduction in revenues, but if your customers are actually promoting the payment method to other vendors, there may be an identifiable benefit. The challenge would be estimating the fair value of those promotional activities.
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Stephen - thanks for the feedback.
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