Simultaneously with the introduction of the mandatory refund scheme (DRS),certain provisions of the Accounting Act have also been amended.
Accounting treatment of DRS products
The accounting treatment is different for:
- the deposit refund on non-reusable products subject to mandatory deposit refund
- the refund on reusable products subject to mandatory deposit refund
- the refund on products with voluntary refund by the producers.
The entity must charge the deposit when selling a product under the mandatory deposit refund scheme. The consideration plus the deposit shall be recognised in net sales revenue.
Accounting treatment of non-reusable products subject to mandatory deposit refund
The amount of the mandatory deposit refund paid (payable) by the company to the concession company on the non-reusable products shall be included in other expenses. Section 81 (2) r) of the Accounting Act)
In the event of refund, the customer can recover the deposit from the distributor or the concession company.
If the distributor pays the refund instead of the concession company, then the distributor shall include in other receivables the receivables from the refund paid by the distributor on behalf of the concession company, until it is settled in some way. (Section 29 (8) of the Accounting Act)
The deposit refund paid by the distributor to the producer for the product purchased is part of the cost of the product purchased. Section 47 (1) d of the Accounting Act) Upon sales this amount is recognised as the cost of goods sold in the distributor’s books. (Section 78 (5) of the Accounting Act)
The deposit received from the customer is part of the consideration for the product and should therefore be accounted for as net sales revenue by the distributor.
Accounting treatment of reusable products and products subject to the voluntary refund scheme
As it is the producer that is required to refund the deposit to the distributor or the customer, this is accounted for in accordance with the rules pertaining to deposit refundable packaging.
The amount of the deposit refund and voluntary deposit refund on reusable products recorded in the correction accounting source document (the correction relates to the date of the refund) should be recorded by the producer as a deduction from the net sales revenue. (Section 73 (2) f of the Accounting Act)
The deposit refunded by the producer shall be deducted by the distributor from the cost of goods sold. (Section 78 (5) of the Accounting Act)
The entity who is the consumer shall deduct the deposit refunded from material costs. (Section 78 (2))
The deposit refund scheme and representation costs
For the company, if a product subject to the mandatory deposit refund scheme is accounted for as representation costs, the deposit also qualifies as representation costs and thus part of the tax base for representation. Deposit refunded is a deduction from the representation cost in the period of financial settlement, and is thus deducted from the related tax base.
Restaurants and the deposit refund scheme
A special rule applies to restaurants and bars. In the case of catering, the deposit is payable by the customer if the product is received with the packaging. In restaurants the customers do not take away the bottles; therefore no deposit refund is incurred. In snack bars, however – as customers will take away the products or get them through home delivery – the deposit is charged.
As clear from the above, the correct accounting procedure for the DRS system can sometimes raise complex professional questions, which RSM consultants are ready to answer.
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