OEMs, Incentives, and Variable Consideration: Case Study

Keywords

OEM revenue recognition, ASC 606 judgment, incentives and rebates

Abstract

Accounting Standards Codification (ASC) 606 places the responsibility on management to recognize revenue in a way that “depict[s] the transfer of promised goods and services to customers in an amount … [they] expect to be entitled,” per ASC 606-10-05-3. For many original equipment manufacturers (OEMs) that sell using a distribution network, a single transaction is likely to require significant judgement. For example, an OEM must determine how to properly account for free add-on services, variable cash rebates, or other incentives that are passed on to the end user. This case study examines the accounting issues OEMs are likely to face as they apply ASC 606 to a typical OEM transaction.

Original Publication Citation

Case Study: OEMs, Incentives, And Variable Consideration (C. Moffat and T. J. Wilks), RevenueHub, February 3, 2017. (2,404 unique views as of Jan. 13, 2023)

Document Type

Peer-Reviewed Article

Publication Date

2017

Publisher

RevenueHub

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

Link to Full Text

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