Promotional income (a.k.a. trade funding, rebates, discounts, allowances) is something of a double-edged sword. On the one hand, it's a major source of income and profit throughout a company's supply chain. According to AMR Research, trade funding can amount to 6%-15% of a typical retailer's revenue. Competition for these promotional dollars has intensified, along with pressures to increase profits from this important income source. One CFO interviewed summed it up by saying, "Customers are where we make our money, but vendors are how we make our profits."
On the other hand, promotional income is a difficult accounting practice to validate. Now, particularly in light of Section 302 of the Sarbanes-Oxley Act (SOA) which requires CEOs and CFOs to personally certify their financial statements, it's become even more of a nightmare. There are multiple definitions for promotional income, and just as many accounting practices for recording it. It can be recognized as revenue, or as a reduced cost of goods, or as a credit against marketing expenses.