If a buyer makes a claim about exported goods or the goods do not arrive: how are a discount, compensation and the exchange difference recorded in the accounts?

"Chirchiq Yorug'lik" LLC sent 16 000 LED lamps to a chain of shops in Bishkek: 2 dollars each, 32 000 dollars in total. Three weeks later a letter came from the buyer: the housing of 1 300 lamps cracked in transit, and they cannot be put on the shelf. Bringing them back would cost more than the freight, so the parties agreed to cut the price by 2 600 dollars. Chief accountant Dilnoza now had four questions: is this a discount or a penalty, what is done with the receivable remeasured at the end of September, what would have happened if the goods had not arrived at all, and do the customs documents need to be touched?

How can a claim be answered, and where does each option go in the books?

The accounting entry follows not from the claim itself but from the text of the agreement signed by the parties. There are four routes:

The difference between the first and second routes is subtle. Under paragraph 382, account 9050 is meant for sales discounts agreed in the contract and, in addition, for price discounts granted as a result of "defects identified in products (goods, work, services) sold". Line 12 of paragraph 309, by contrast, gives the amount owed on accepted claims, including those for non-conforming product quality, with the pair 9430 – 6960. So if the agreement changes the price, it is 9050; if the price stays the same and a separate payment is agreed, it is an other operating expense through 6960.

The third route, the goods coming back, is re-import from the customs side (code 41 in the CCD, Annex 3 to the instruction), and its conditions and journal entries are covered in detail in a separate article on the site (see the link below). Here we focus on cases where the goods do not come back.

On the fourth route, paragraph 17 of NAS No. 2 is clear: if collection of an amount included in revenue becomes uncertain, the unrecovered amount is recognised as an expense, not as an adjustment of the revenue originally recognised. That is, if the buyer simply does not pay, you cannot record it on 9050 and reduce revenue.

Which documents are drawn up?

The shipment itself uses the accompanying documents from Article 9: commercial documents (the invoice, the shipping and packing lists, other documents confirming the transaction) and transport documents (the bill of lading, the waybill or another document confirming the contract of carriage). The list of documents needed for export clearance is set by the Cabinet of Ministers (Customs Code, Article 31); check it against the current version.

Documents added when a claim arises:

• the buyer's claim letter and evidence of the damage (a report, photographs, a transport document marked by the carrier) (practical tip);
• a supplementary agreement to the contract: it states the chosen route (price discount or compensation), the amount in foreign currency and the date; the accounting entry rests on exactly this document (practical tip);
• an amendment to the CCD, if needed: under Article 266 of the Customs Code, after clearance is completed and the goods are placed under a procedure, the CCD is amended, supplemented, re-issued or cancelled within three years from the day it was accepted, at the request of the customs authority or on the application of an authorised person; changes and additions to the data in an electronic CCD are made by drawing up the form for making corrections to the CCD. The procedure is set by the State Customs Committee.

At which rate is the discount recorded, and what happens to the month-end remeasurement?

The difficulty in Dilnoza's case is that the sale is in September, the discount in October and the money in November. Under NAS No. 22 three rules apply:

• a foreign currency transaction is recognised at the Central Bank rate on the date it is carried out (paragraph 7);
• the buyer's dollar receivable is a monetary item (paragraph 9), and monetary items are remeasured every month at the rate on the last day of the reporting month and on the date the transaction is carried out (paragraph 8);
• the exchange difference is income or expense from financial activities (paragraph 11).

One method that follows from these rules: the day the discount is agreed is treated as the date of the foreign currency transaction, the receivable itself is first brought to that day's rate, and then the discount is recorded at that rate. The standard does not separately name a rate date for discounts, so set the chosen method in your accounting policy. The rates in the example are hypothetical:

Calculation:

• revenue: 32 000 × 12 480 = 399 360 000 soum;
• 30 September: 32 000 × (12 520 − 12 480) = +1 280 000 soum;
• 14 October, bringing the receivable to the agreement day: 32 000 × (12 505 − 12 520) = −480 000 soum;
• discount: 2 600 × 12 505 = 32 513 000 soum; the remaining receivable is 29 400 dollars, i.e. 367 647 000 soum;
• 31 October: 29 400 × (12 530 − 12 505) = +735 000 soum;
• 6 November: 29 400 × 12 490 = 367 206 000 soum arrived at the bank, while the receivable balance was 29 400 × 12 530 = 368 382 000 soum; the difference is −1 176 000 soum.

Check: 399 360 000 + 1 280 000 − 480 000 − 32 513 000 + 735 000 − 367 206 000 − 1 176 000 = 0, i.e. the buyer's balance on 4010 is closed.

Result:

• net revenue: 399 360 000 − 32 513 000 = 366 847 000 soum;
• gross profit: 366 847 000 − 290 000 000 = 76 847 000 soum (without the discount it would have been 109 360 000);
• total exchange difference: 1 280 000 − 480 000 + 735 000 − 1 176 000 = +359 000 soum;
• the 367 206 000 soum received at the bank = net revenue 366 847 000 + exchange difference 359 000.

Note: the exchange difference does not mix with the discount. The discount reduces revenue, while the exchange difference stands separately, in the result of financial activities.

What if compensation had been chosen? Had the agreement kept the price at 32 000 dollars, with the seller agreeing to pay 2 600 dollars of compensation, on 14 October Dt 9430 – Ct 6960 for 32 513 000 soum would have been recorded (paragraph 309, line 12). Net revenue would stay at 399 360 000 soum and gross profit would be 109 360 000 soum, but an other operating expense of 32 513 000 soum would appear. Profit from main activities is the same in both cases; the difference is only in which line of the statement it shows up. The dollar compensation liability is also a monetary item and is also remeasured at month-end (NAS No. 22, paragraphs 8 and 9). The NAS No. 21 table has no ready line for the entry offsetting it against the buyer's receivable: set this in your accounting policy.

What is done if the goods do not reach the buyer at all?

Here everything depends on the point at which the risk passed, and that is set by the contract and the delivery terms in it (NAS No. 2, paragraph 16, first condition).

If the risk has already passed to the buyer. Suppose the contract states that the risk passes when the cargo is handed to the first carrier. Then the sale has taken place and the revenue stays where it is. The buyer settles the loss in transit with the carrier or with their own insurer. If the buyer still does not pay, this is the fourth route above: an expense under paragraph 17 of NAS No. 2.

If the risk is still with the seller. If the contract states that the risk passes when the goods reach the destination, the first condition of paragraph 16 is not met on the shipment day, so revenue is not yet recognised and the goods remain the seller's asset. If they are lost in transit, the loss is recorded in the seller's books:

There is a customs side as well. Under Article 29 of the Customs Code, goods lose the status of goods of Uzbekistan only when they have been placed under the export procedure and actually taken out of the customs territory. Part three of Article 30 requires the goods to be taken out in the condition they were in on the day the customs declaration was registered (except for natural wear and loss under normal transport or storage). If the goods are damaged before crossing the border and the export is cancelled, part two of Article 266 opens a way. Under its first sentence, the CCD may be withdrawn before the goods are released if the customs authority finds the reasons given by the declarant or the customs broker justified. Under its second sentence, the CCD for goods being exported may be withdrawn even after permission to take them out has been given, but before the goods are actually taken out.

What is done with the customs declaration and payments after a discount?

The Customs Code offers two tools here.

Correcting the CCD (Article 266). After clearance is completed and the goods are placed under a procedure, the CCD may be amended, supplemented, re-issued or cancelled within three years from the day it was accepted, at the request of the customs authority or on the application of an authorised person. The procedure for this is set by the State Customs Committee. Whether a post-export discount requires a correction to the CCD is determined by that procedure: clarify it with your broker and the customs authority.

Refund of overpaid customs payments (Articles 353–357).

• One of the grounds for a refund: when payments are recalculated in connection with an adjustment to the customs value of the goods and (or) to the customs payments (Article 354).
• The overpaid amount is refunded or credited against the payer's initial funds within three years from the time it was paid (Article 353, part two).
• The application is filed with the customs authority to which the amount was paid, together with documents confirming the right (Article 355). The decision is taken within ten working days from the day after the application and documents are received; if an additional check is needed, the review is extended by a period not exceeding ten more working days (Article 356).
• No refund is made on an application filed after the deadline, nor where the amount does not exceed twenty percent of the base calculation amount (Article 353, part seven).
• No interest is paid on the refunded amount and it is not indexed (Article 357).

Practical tip

The following are the author's practical recommendations (practical tip), not a regulatory requirement:

• Write the agreement text together with the accountant. The phrases "the price is reduced by ... dollars" and "the seller pays ... dollars of compensation" lead to different lines in the statements. Decide which one you need before signing.
• Record the discount in foreign currency and with an exact date. The rate is taken from that date, so if the agreement contains only an amount in soum, it will not match the contract currency.
• Collect the evidence on the day the claim arrives. The buyer's report, photographs, a transport document with the carrier's mark: these become the basis for the entry on 9050 or 9430.
• Do not forget the month-end remeasurement before the discount. If the foreign currency balance and the soum balance on 4010 are kept per contract in a separate table, you will find the exchange difference on the agreement day in a minute.
• Look at the tax side separately. The question of adjusting the VAT base after a discount or a return is settled separately under the Tax Code (see the link below).