7/2/2023 0 Comments Revenue expenses![]() ![]() While these expenses do not always result in presentation net of revenue, it’s common to see these types of services and expenses, especially with distributor contracts, required to be included as a reduction to revenue. ![]() Expenses can also be derived from services the customer or distributor provides that might not be separated from their purchases, like advertising, free samples, customer support, shipping and delivery, or options to purchase other items. Typical expenses that require analysis can come from contractual pricing arrangements, including agreements such as rebates and discounts, price or margin protection, tiered pricing, or nonrefundable upfront fees. Which Expenses Should Be Offsetting Revenue? These standards are subject to significant judgment, and often, companies default to recording all manufacturing costs as COGS and all other costs incurred outside of the manufacturing process as SGA, which could overstate both revenue and margins. Companies should examine expenses incurred in fulfilling contracts with customers and distributors for several factors that would indicate they should be presented net of revenue, in COGS or SGA, in line with Accounting Standards Codification (‘ASC’) 606, Revenue from Contracts with Customers. Analyzing and Evaluating ExpensesĮxpenses incurred during normal operations typically fall into one of three areas: contra-revenue expenses, cost of goods sold (“COGS”), or selling, general, and administrative expenses (“SGA”). However, companies often encounter challenges when allocating expenses in line with US GAAP, which could result in improper reporting and disclosure of these metrics. Revenue growth and gross margin percentages are key metrics to owners, managers, suppliers, customers, and investors of companies in the brewery, distillery, and beverage space. ![]()
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