FASB to Change the Rules of Bookkeeping

It has long been a practice of consumer products companies to pay an up-front fee to retailers for the privilege of having retailers carry their products. This fee, referred to as a slotting fee, is typically grouped with other marketing costs for purposes of representation on financial statements.

The Financial Accounting Standards Board has taken notice of this practice and has determined that slotting fees should be considered a cost of sales expense and thus should affect the gross profit of a company that pays such fees.

Beginning in the first quarter of 2002, companies will have to deduct the amount they pay in slotting fees from revenue and will no longer be able to include the expense as a marketing expense. Furthermore, companies will be required to revised old financial statements to reflect past amounts spent on slotting fees.

Regulators at the Federal Trade Commission support the reporting change, claiming that the slotting fees have stifled competition with smaller companies that may not be able to afford the expense. Slotting fees may never go away, but at least the secretive nature of the fees will now have to be disclosed, and the profits reported by manufacturing companies that pay these fees may reflect a truer image of the companies' performance.

You may like these other stories...

Treasury prepares options to address tax inversionsDamian Paletta of the Wall Street Journal reported on Monday that US Treasury Department officials are assembling a list of administrative options for Treasury Secretary...
Read more from Larry Perry here and in the Today's World of Audits archive.In my previous article, I discussed auditing standards and the impact of the assessed level of risk of material misstatement (RMM) on the design...
While audits of broker-dealers showed some improvement last year compared to previous years, 71 of 90 broker-dealer audits inspected by the Public Company Accounting Oversight Board (PCAOB) in 2013 were still found to have...

Already a member? log in here.

Upcoming CPE Webinars

Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.