Our products are to enter one Super Market. The Market offer us exclusive contract for such product (effective for 2 years) but with a fixed amount of Bidding Commission. The commission is to be paid once the contract is signed by 50%, and the rest be paid end of 1st year. Shall we book the commission as net of Sales, COGS, or Expense? Can we amortize the commission over the contract period? Thanks!
Accounting treatment for Bidding Commission
Answers
Kevin,
This sounds very much like slotting-fees, which I tend to put into
I would definitely not put it into COGS, from your description.
Sales is iffy depending on how you track sales expense. I usually segregate Sales as sales force compensation; if this is paid to a third-party then it may be sales comp. If it is paid to the market, I'd be more comfortable putting it into the marketing budget. At that level, however, I'd ask my business
KP
1
Dear Keith & Patrick,
Thanks for your reply & help! After internal discussion, we deem it shall be expense to be amortized over the contract period as well.
Keith has this right. These sound like slotting fees and would actually be accounted for as a reduction in revenue. See ASC 605-50-45-2 through 45-4. Since it's not directly related to the sale of product, put in prepaids and amortize over the term of the contract.
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