Question

The FASB has reduced the wide latitude that companies once had in accounting for vendors rebates by issuing EITF issue No. 02-16. What recommnedations would you suggest to the FASB for further improving the accounting and auditing guidance in the area of vendor rebates? State Three (4) recommendations.

Answer 1

The recommendations to FASB for improving the accounting and auditing guidance in the area of the vendor rebates are: there should be a categorization of the payments received by the customers so that it can be easily incorporated in the income statement. The customers must be provided with the details of the fair value of the product so that they can ascertain the benefits. The last recommendation is that those customers should be given rebates who are long time users and they are attached with the vendor and remained loyal and the rebates of such customers must be accumulated as a reduction of cost of the sales which has made by the customer.So, these are the three recommendations for improvement.