Can you defend your rebate accrual?
Off-invoice economics — the rebates, billbacks, chargebacks, and incentives you pay your customers and channel partners — is often the largest number on the income statement that no one can fully explain. This is a five-minute check of whether yours would survive an auditor’s questions. Score one point for each “yes.”
Expected value or most-likely-amount? Documented, or “the way we’ve always done it”? The revenue-recognition rules require the method to be chosen and documented, program by program.
The standard
ASC 606-10-32-8
The rules only let you book the portion you’re confident won’t reverse later. Can you show why your number sits where it does?
The standard
ASC 606-10-32-11
Not just trued-up at year-end — reassessed each close as new sales data arrives.
The standard
ASC 606-10-32-14
Pick a number in the reserve. Can you get to the originating invoice, agreement, and tier in under ten minutes?
The standard
ASC 606-10-50 (disclosure of methods, inputs, assumptions)
When rebates are paid, does the liability roll forward cleanly, or is there an unexplained adjusting entry?
The standard
ASC 606-10-32-25 (refund liability)
If the person who owns the workbook left tomorrow, could the number be reproduced?
The standard
Internal control over financial reporting
The standard
ASC 606-10-50