There is a new Revenue Recognition standard that will need to be implemented for annual reporting periods beginning on or after December 15, 2018. The standard affects all entities—public, private, and not-for-profit — that record transactions using GAAP.
Manufacturers often encounter Volume Rebates which under the new revenue recognition standard, may be recorded differently than the current practice.
Below is an example of the application of the new standard to a volume rebates:
A chemical company has a one-year contract with a car manufacturer to deliver high performance plastics. The contract stipulates that the chemical company will give the car manufacturer a rebate when certain levels of future sales are reached, according to the following scheme: