Accounting For 'Hello Money'

myshirt

Surprised there isn't a thread on this...

Possibly a sensitive topic for certain auditors at the moment, but how should this be accounted for?

Surely the materiality and nature of the revenue stream is such that it should be disclosed separately on the face of the SPLOCI? Why isn't it? Why do current practices prevail?

TLDR - 'Hello Money' is as just as ethical an issue as 'Goodbye' money in financial reporting. Are current practices on this issue 'right'?

mackers87

What is 'hello money'?

And what would you consider to be current practice?

Alan Shore

Hello Money is a payment by a supplier to get their product listed in a supermarket.

Don't know what the practice is. Would not have thought that it would be material enough to merit separate disclosure. Could it be argued that the receipt of hello money is a credit to cost of sales?

myshirt

Alan Shore wrote: »

Hello Money is a payment by a supplier to get their product listed in a supermarket.

Don't know what the practice is. Would not have thought that it would be material enough to merit separate disclosure. Could it be argued that the receipt of hello money is a credit to cost of sales?

That is how I understand the bulk of the adjustment occurs - by offsetting.
But there is much more to it. These hello money figures are subject to a very large degree of estimation uncertainty. Retailers develop an expectation of what they will be able to nail the suppliers on, and then post an accrual. As regards the offsetting, it is now always a case of taking from the margin and posting it as a settlement discount. I have had clients who contributed to the cost of a freezer, covered a loan payment, covered a portion of a manager's salary or just made flat payments under marketing or promotion headings.

I wonder what way they are treating them. The figure is potentially huge in terms of it's significance as an income stream line.

Geniass

myshirt wrote: »

That is how I understand the bulk of the adjustment occurs - by offsetting.
But there is much more to it. These hello money figures are subject to a very large degree of estimation uncertainty. Retailers develop an expectation of what they will be able to nail the suppliers on, and then post an accrual. As regards the offsetting, it is now always a case of taking from the margin and posting it as a settlement discount. I have had clients who contributed to the cost of a freezer, covered a loan payment, covered a portion of a manager's salary or just made flat payments under marketing or promotion headings.

I wonder what way they are treating them. The figure is potentially huge in terms of it's significance as an income stream line.

I don't think an auditor (properly doing his job) would allow an income accrual based on future 'hello money'. The benefit has not yet passed.

myshirt

Let's see what the FRC come up with on their review of the quality of certain audits :pac: