Vendor Incentives - MASB

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PHARMACEUTICAL SEGMENT MEDICAL DEVICES AND DIAGNOSTICS SEGMENT Balance at Balance at Balance at Balance at Beginning Payments/ Beginning Beginning Payments/ Beginning (Dollars in Millions) of Period Accurals Other of Period (Dollars in Millions) of Period Accurals Other of Period 2009 2009 Accrued rebates (1) $ 1,261 3,975 (4,172) 1,064 Accrued rebates (1) $ 416 2,229 (2,191) 454 Accrued returns 490 147 (295) 342 Accrued returns 189 74 (43) 220 Accrued promotions 107 330 (353.00) 84 Accrued promotions 47 120 (94.00) 73 Subtotal 1,858 4,452 (4,820) 1,490 Subtotal 652 2,423 (2,328) 747 Reserve for doubtful accounts 48 37 (2) 83 Reserve for doubtful accounts 109 50 (16) 143 Reserve for cash discounts 23 462 (437) 48 Reserve for cash discounts 34 416 (418) 32 Total $ 1,929 4,951 (5,259) 1,621 Total $ 795 2,889 (2,762) 922 2008 2008 Accrued rebates (1) $ 1,249 3,331 (3,319) 1,261 Accrued rebates (1) $ 336 1,947 (1,867) 416 Accrued returns 345 168 (23) 490 Accrued returns 190 99 (100) 189 Accrued promotions 263 414 (570) 107 Accrued promotions 18 208 (179) 47 Subtotal $ 1,857 3,913 (3,912) 1,858 Subtotal $ 544 2,254 (2,146) 652 Reserve for doubtful accounts 26 24 (2) ( ) 48 Reserve for doubtful accounts 96 36 (23) ( ) 109 Reserve for cash discounts 24 376 (377) 23 Reserve for cash discounts 24 257 (247) 34 Total $ 1,907 4,313 (2) (4,291) 1,929 Total $ 664 2,547 (2) (2,416) 795 (1) Includes reserve for customer rebates of $327 million at January 3, 2010 and $344 (1) Includes reserve for customer rebates of $311 million at January 3, 2010 and $304 million at December 28, 2008, recorded as a contra asset. million at December 28, 2008, recorded as a contra asset. (2) Includes $115 million adjustment related to previously estimated accrued sales reserves. (2) Includes $56 million adjustment related to previously estimated accrued sales reserve. 14 Copyright © 2011 <strong>MASB</strong>
How did the Dell/Intel Scheme work? 2003 – 2007 : 20 straight quarters Total incentives paid - $4 $4.3 3 b Q1 ´07 payment was $720 m – 76% of operating p gincome Dell company paid $100 m SEC penalty – Michael Dell paid $4 m SEC penalty – November ´09 - $1.25 b to AMD $1.5b to EU 15 Copyright © 2011 <strong>MASB</strong>
Page 1 and 2: Partnering w/Finance and Accounting
Page 3 and 4: PepsiCo, Inc. and Subsidiaries Cons
Page 5 and 6: How Big is this Practice? Hundreds
Page 7 and 8: Vendor Incentives What we call the
Page 9 and 10: Big Pictures: Why do firms do this?
Page 11 and 12: Financial Fraud: The Story of Dell
Page 13: Accounting for Contingent Incentive
Page 17: Marketing Accountability Standards

Vendor Incentives - MASB

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