USA ASC 606 - How to record free promotional materials provided to retail customer along with main product

[accountingqs]

The customer in question is a retailer. We sell our product to the retailer on a wholesale basis. As part of our contract with the retailer, they will only purchase product from us if we provide free promotional materials (displays, etc) for them to put in their store to promote the sale of our product to THEIR customers (they are promoting the re-sale of our product at that point and we have already received payment from the retailer).

How would we record the cost of these promotional materials on our books? Does this fall under "Customer options to acquire additional free or discounted goods or services" under ASC 606-10-55-42? The customer would not have received these products for free had they not entered into a contract with us.

 

[kirby]

ASC 606 shows how mountains of rules get produced when rule makers have loads of time on their hands. Anyway, this is their point with respect to your case. If the cost of the promotional materials is immaterial, then record the cost when cost is incurred (when you pay for the materials). If the cost is material, ACCRUE the cost of promotional materials for that contract when contract is signed.

And yes, ASC 606-10-55-42 applies here.

 

[accountingqs]

ASC 606 shows how mountains of rules get produced when rule makers have loads of time on their hands. Anyway, this is their point with respect to your case. If the cost of the promotional materials is immaterial, then record the cost when cost is incurred (when you pay for the materials). If the cost is material, ACCRUE the cost of promotional materials for that contract when contract is signed.

And yes, ASC 606-10-55-42 applies here.

Would the cost be recorded as a cost of sale, or a marketing cost?

 

[kirby]

Marketing cost is more informational as to the expense type.