Broker Commission Rebate to Reduce PPE Cost—Not Recorded as Income | Ind AS

Under accounting rules for property, plant, and equipment (PPE), especially as per Ind AS 16, companies must include all costs directly related to bringing an asset to its working condition. This includes the purchase price, any related taxes or duties, and costs needed to get the asset ready for use. Importantly, if any discounts or rebates are received during the purchase, they must be subtracted from the asset’s cost, even if those rebates come indirectly.

In this case, a company wanted to buy a machine but wasn’t satisfied with the supplier’s quoted price. While the supplier didn’t reduce the price, the broker involved in the deal decided to share part of his commission with the buyer after the machine was delivered. This raises a key question: Should the money received from the broker reduce the cost of the machine, or should it be treated as income in the company’s profit and loss account?

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