Accounting for free services provided

[markDXB]

Hi Guys!

I'm new here and my apologies for my first post as a question. I really just need some help.
Would appreciate if anyone out there can advise me on my query, more preferrable if you can provide the Accounting standard as basis.

So here's my question:

Our company is selling merchandise and as additional benefits to employees, free merchandise is provided to the employees. Also, this is done with business partners.

Currently, we post a revenue for it and an expense account to offset. But is it correct that we still record this as a revenue/expense? Or should this be not recorded in the books?

If this should still be recorded, what should be the treatment? At what value, market selling price or cost?

Would appreciate any help from you guys. Many thanks!

 

[kirby]

For one thing I would stop your current practice. It has zero net effect and only inflates your revenues and expenses for a non-event. For merch given to employees i would record the cost of the merch as an employee expense. For customers i would record the cost as marketing expense.

 

[markDXB]

thanks for the reply. we're actually leaning to changing the practice. I have not found a single standard regarding this. I'll probably just go back to IAS 18 re: revenue recognition.

 

[kirby]

I'm curious. Is that merchandise cost recorded in an inventory asset account before you give it away or which account?