I am working for a company that is purchasing an existing fuel distribution business. While converting their books from cash to GAAP, there is one account that has us scratching our heads. The supplier gives money upfront in exchange for an 10 year exclusive supply contract. Margin is a fixed amount over rack, and most have minimum volume requirements. What is the correct way to account for these transactions?
Vendor Signing Bonus for Supply Contract
Answers
Same as if you pay Costco for a one year membership fee allowing you to buy discounted items. Amortize the fee over the period of benefit
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Accounting