Revenue recognition and Compensation/Rebate schemes 2587



  • Hi
    This forum is a great source of info by the way…
    I’ve been negotiating a global contract with a Global but German based Powerhouse supplier (Siemans) who has recently subsumed a US owned Software provider into it’s business (UGS)
    The arrangement is based on achieving a target level of sales, against which we would be looking to secure some degree of rebate - probably on a sliding scale, depending on the level of sales achieved, based on a period of time to be determined - possibly quarterly - but maybe monthly
    Part of the arrangement means incorporating the newly subsumed arm of Siemans into the arrangement (as we currently deal with this division too) and it’s commercial sense to do this
    I am not up on my SOX law, but the UGS division of Siemans is arguing that due to Revenue Recognition (due to some old US ties they still have despite being bought a fully owned subsidiary of Siemens), they are not able to participate in any rebate scheme
    Are they hiding behind this as means to avoid being incorporated as part of the entire Siemans deal we are trying to place? I get a sense of some politics internally between the various divisions, but that is competely unsubstantiated
    I guess what do you guys know about revenue recognition which may help me one way or the other?
    Any experience of dealing with rebate schemes in the US as surely this is common commercial practice?
    Thanks



  • Sabrina,
    They are probably just using this as a pretext for not wanting to grant you a rebate.
    By the way Siemens is spelled with an ‘e’ before the n.
    Your description of the situation is not entirely clear. It seems that Siemens is that you are buying products and services from Siemens and that you want a rebate if your purchasing volume reaches certain minimum amounts. If Siemens is the vendor then they need to care how to recognize revenue in their consolidated financial statements.
    Siemens stopped using US GAAP as their financial reporting standard in the fiscial year ending 30 September 2007 and only used International Financial Reporting Standards (IFRS). The accounting standards for revenue recognition are less complex under IFRS than under US GAAP.
    I think they are bullshitting you…



  • Acounting standards do not ban certain contracts. They just cover how contractual arrangements should be reflected in the financial statements.
    Obviously overly complex contractual arrangements can be a hassle for the accounting department and can be a source of errors. This can be a reason to prefer more simple rebate schemes.



  • Acounting standards do not ban certain contracts. They just cover how contractual arrangements should be reflected in the financial statements.
    Obviously overly complex contractual arrangements can be a hassle for the accounting department and can be a source of errors. This can be a reason to prefer more simple rebate schemes.
    So very true.
    Many things are done in the name of SOX and/or accounting standards, but we should not lose sight of the above


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