Revenue for consumer products companies

Key impacts

• Revenue may be reduced before an incentive offer is explicitly made based on a company’s past practice of providing incentives to end customers
• Most retrospective volume rebates will have similar accounting to today. However, revenue may be deferred for certain discounts on future purchases
• Most slotting fees will continue to reduce revenue
• Revenue upon sale to the distributor will be deferred for promises to provide the end customer with an additional good or service
• A portion of revenue earned on the sale of products may need to be allocated to equipment or merchandising services provided to the retailer
• The balance sheet will be grossed up to present a refund liability and an asset for recovery. Some companies may experience a change in their estimates of returns
• Certain types of arrangements will experience a change in the timing of revenue recognition
• If a company provides a service in addition to a standard assurance warranty even if the service is not sold separately, a change in the accounting and amount of revenue recognized for the product may occur
• Companies applying the sell-through method of accounting will likely experience an acceleration of revenue and cost recognition
• Revenue from consignment arrangements is not recognized when products are delivered to the intermediary
• Companies will no longer have the choice to expense commissions as incurred if certain criteria are met
• Most principal versus agent conclusions are unlikely to change, but these conclusions should be analyzed under the new framework
• Companies can elect to present sales taxes on a net basis or they can perform a jurisdictional analysis, which may result in some taxes being presented gross and others net