With a credit note, which is widely used in foreign economic activity, the seller informs the buyer, in particular, about the provision of bonuses in the form of discounts or premiums. How credit note in the form of a discount on goods is reflected in the accounting – below.
Reflection rules
The initial value of any goods, in particular imported, is formed according to the rules established in item 9 of NAS 9 “Inventories”.
Imported goods are accounted for at cost, which consists of the following costs:
- the amount paid in accordance with the contract to the supplier less indirect taxes;
- the amount of import duty;
- the amount of indirect taxes in connection with the acquisition of inventories, which are not reimbursed to the company (if the company is not a payer of value added tax;
- transport and procurement costs;
- other costs that are directly related to the purchase of goods and bringing them to a state in which they are suitable for use for their intended purpose. In the case of import of goods, other costs include payment for the services of a customs broker, the cost of mandatory certification of goods, etc.
At the same time, given the requirements of item 15 of NAS 9, the formed initial cost of goods in accounting is not changed. That is, the importer forms the initial cost of goods at the time of their posting on the basis of the set price of the supplier, reflected in the foreign trade agreement, and less the discount. This is confirmed by item 2.2 of chapter 2 of the Methodological recommendations for inventory accounting, approved by Order of the Ministry of Finance No. 2 of January 10, 2007.
The discount was received after posting the goods or after the sale of the goods or part thereof
This is the case if the discount is issued before posting the goods. And what to do if you received a discount after posting the product or even after selling the product or part of it? The above-mentioned regulations do not say anything about it. Opinions of experts on this issue are divided.
Some believe that since it is not possible to adjust the initial cost after posting the goods, it is necessary to recognize income in the amount of the discount received: Dt 632 “Settlements with foreign suppliers” – Kt 719 “Other operating income”. At the same time on the date of recognition of income there is a need to recalculate the debt in foreign currency and exchange rate differences (items 5, 8 of NAS 21 “The effect of changes in foreign exchange rates”).
Others consider (this approach is more practiced among accountants) appropriate to make adjustments by the ‘reversal’ method. At the same time, if the goods have not yet been sold (accounted for in the warehouse), then the reduction of the initial cost is reflected by conducting: Dt 281 “Goods in the warehouse” – Kt 632 (‘reversal’ method).
If a discount was received after the sale of goods, then the cost of goods sold must be reduced. Conducting will be as follows: Dt 902 “Cost of goods sold” – Kt 632 (‘reversal’ method). However, in this case you will have to adjust the exchange rate differences., since the balance on Kt 632 should reflect the real debt for the goods.
If the post-sale discount was received in the year following the sale of the goods, then the amount of the discount (calculated at the rate of the National Bank on the date of posting the goods) should be recognized as other operating income: Dt 632 – Kt 719.
Receipt of imported goods on terms of payment deferment
In the case of receipt of imported goods on terms of payment deferment, the initial value of such goods in accounting is determined at the exchange rate on the date of their posting (item 5 of NAS 21).
It should also be borne in mind that the value of the received but unpaid goods is considered accounts payable. In this case, accounts payable are recognized as a monetary item. In accordance with paragraph 8 of NAS 21 for monetary items in foreign currency the exchange rate differences are determined:
- on the balance sheet date;
- on the date of the business transaction (payment for the goods).
Exchange rate differences are reflected in other operating income (expenses) on the following sub-accounts:
- 714 “Income from operating exchange rate differences”;
- 945 “Losses from operating exchange rate differences”.
Therefore, in general, in the case of import of goods on terms of payment deferment, exchange rate differences are determined on the balance sheet date and on the date of payment for goods.
