In the wake of the recent Dick Smith retail failure, and accounting scandals at Target in Australia and Tesco's in the UK (all of which were linked to rebates), questions have been raised about whether there is sufficient disclosure of rebate information. Whilst rebates are undeniably an important part of the retail industry landscape, they shouldn't be the beginning, middle and end of the retail profit story. As suggested in this article, perhaps greater disclosure of rebate information (particularly the proportion of profit, proporotion of receivables and proportion realised vs unrealised / unsold) might shine a light. Such measures are likely to be met by strong industry resistance, however, as they will likely betray what is currently private information to the market and to competitors. Time will tell whether the regulators and accounting standard setters will be motivated to "move" on this issue.
Given the complexity of rebates and the judgment allowed in booking them, which is particularly relevant to retailers that sell slower moving products, it should be a call out to shareholders to use their clout to agitate for retailers to start disclosing rebates separately. Only then will behaviours start to change. Companies should have to disclose how much of their profit relates to rebates released, how much of the receivables accrued on the balance sheet relate to receives released to profit and how much relates to inventory that has not been sold.