[MrsBing]

I need help on the accounting treatment for a rebate. The company I work for is receiving a rebate check from an electric company for installing an energy efficient capital tool.

What would the entry be for the rebate and for the capital tool? Do you know where this would be referenced in the fasb codification?

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

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[MrsBing]

Bump

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[MrsBing]

I am looking everywhere and I can't find this in the codification. Any help would be appreciated.

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[MrsBing]

I believe I figured it out, but if anyone knows where this would be found in the fasb codification please let me know.

Since the rebate is from a 3rd party (not the company who sold the asset), it would be recorded as revenue. If the rebate was from the vendor, then it would reduce the cost basis of the asset.

Rebate Check:

Cash (DR) $xxx

Non operating revenue (CR) $xxx

Capital Tool:

Captial Asset (DR) $xxx

Cash (CR) $xxx

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

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[Mamabear]

We had a similar situation recently, but not for a capital asset. We had a rebate check from a third party and we booked it the way you did DR Cash CR Other income instead of booking it as a credit to the expense account it affected. I don't know where it could be found in the codification, but I think your rationalization is accurate. It is from a third party and should not affect the asset.

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[mla1169]

We would reduce the amount to be capitalized by the amount of the rebate check.

I.E. Solar panels cost $50k but there is a $5k rebate, we would only capitalize $45k. It doesn't matter that the rebate is from a 3rd party and not the vendor. Lots of items that are capitalized include amounts from multiple sources (for example you'd include freight to a freight carrier, license fees paid to the city, or fees paid to an electrician to hook up the equipment).

So the rebate to us, would be capitalized because it is part of (as a reduction) the total cost of the asset itself.

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[MrsBing]

mla1169, do you know what accounting literature I can search for your justification? The capital tool is $100K and the rebate is $50K, so reducing the cost of the tool would be significant.

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
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[mla1169]

This isn't exactly what you're looking for because its (a) speaking to IFRS and (b) talking about construction (which this may not be) for mining and minerals but its the same justification and capital policy I've been using since long before IFRS was even a twinkle (bottom lefthand of page 2)

https://www.ey.com/Publication/vwLUAssets/Refining_IFRS_Delivering_capital_projects_May_2012/$FILE/Refining_IFRS_Projec_%20risk_May_2012pdf.pdf

FAR- 77
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Massachusetts CPA (non reporting) since 3/12.

[Mamabear]

Ah. Good to know in case we get a rebate on a capital item. Thanks!

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[MrsBing]

Thanks for both your help. I'm going to account for it as a cost reduction.

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[Author]

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