Rebates Related to the Purchase of Inventory

A Company is a distributor of electrical equipment in Thailand. The Company will receive volume rebates from its vendors based upon the total annual purchase volume of electrical equipment.

Keywords: Mazars, Thailand, Accounting, IAS 2, TAS 2, Rebates

24 June 2015

During the year the Company receives rebates amounting to Baht 30 million from the vendor as a result of reaching certain purchase targets.   

Should volume rebates be recognised as income or deducted from the cost of inventories in the financial statements?

According to IAS 2 and TAS 2 paragraph 11:

The costs of purchases of inventories comprise the purchase price, import duties and other taxes, and transport, handling and other costs directly attribution to the acquisition of finished goods, material and services.  Trade discounts, rebates and other similar items are deducted in determining the costs of purchases.

As a result, the volume rebates that have been received from the vendor should be deducted from the cost of inventories.