FASB consideration payable to a customer proposal: Find the Platform Credits and Financing Subsidies That Will Leave Your Expense Lines

FASB's proposed update on consideration payable to a customer, issued October 22, 2026, would move certain payments a company makes to its customer's customers, or on a customer's behalf, out of expense and into a reduction of revenue. Net income does not change. Revenue, take rate, gross margin, and every metric built on them do.

Why this matters now

On 2026-10-22 the Financial Accounting Standards Board issued a proposed Accounting Standards Update to Topic 606 on consideration payable to a customer, with comments due November 23, 2026. Today's guidance already treats a payment to a customer, or to a party that buys the entity's goods through that customer, as a reduction of the transaction price and therefore of revenue, unless the payment buys a distinct good or service at fair value. What the guidance does not say is how to treat a payment to someone outside that chain: a shopper who buys from a marketplace seller, or a bank that finances a retail customer's purchase. FASB's stated reason for the project is that this gap has produced diversity in practice, with economically similar transactions accounted for in different ways.

The proposed test has two prongs. A payment made on behalf of a customer, or to a customer of the entity's customer, is consideration payable to a customer when it is made in connection with satisfying the entity's promise to that customer and either the entity has explicitly promised to make the payment, or the customer has a reasonable expectation that it will because the entity implicitly promised to do so or the payment represents an in-substance price concession. Deloitte's summary, also dated 2026-10-22, and EY's review for the week ending 2026-10-22 both describe the two fact patterns the project was built around: a platform that gives credits, rebates, or discounts directly to end users to encourage purchases from sellers who are the platform's customers, and a retailer that pays a third-party bank so its own customer can buy on interest-free financing.

The project moved quickly. An agenda request reached the Emerging Issues Task Force on January 30, 2026, the Task Force recommended a project at its June 23 meeting, and on 2026-08-19 the Board added it to its technical agenda, agreeing that the guidance would apply to all entities, that illustrative examples would be added to Subtopic 606-10-55, and that transition would be modified prospective or modified retrospective. No effective date has been set. The Board will decide that, and settle the transition wording, after it reads the comment letters.

For a CFO the timing is the point. The coverage so far is written for technical accountants and tells you what the proposal says. It does not tell you how to find these payments in your own ledger this quarter, what they do to the numbers your board and lenders watch, or whether the transition choice is worth a comment letter by November 23. The rest of this article is that answer.

What moves on the income statement, and what does not

The mechanics are a reclassification. Today a platform that funds a $10 shopper credit typically debits marketing or customer incentives and credits a liability until the credit is redeemed. Under the proposal, if the credit meets the test, the debit goes to a contra-revenue account instead. The credit side is the same liability, so the balance sheet does not move. The expense line falls by the amount of the credits and revenue falls by the same amount. Operating income, net income, cash, and the point-in-time balance of unredeemed credits are identical under both treatments.

What changes is every ratio with revenue in the numerator or the denominator. Take rate, defined as revenue divided by gross merchandise value, falls. Gross margin percentage falls, because cost of revenue is unchanged while revenue is smaller. Marketing as a percentage of revenue falls, because the numerator loses the credits and the denominator loses the same dollars. Revenue growth can fall sharply if the current year is presented on the new basis and the prior year is not, which is exactly what a modified transition can produce. The finance metrics guide for controllers covers how these ratios are defined and why a board notices a one-point move in gross margin before it notices a ten-point move in marketing spend.

Timing follows existing Topic 606 rules. A reduction of the transaction price is recognized at the later of when the related revenue is recognized and when the entity pays or promises to pay. For a marketplace that announces a promotion to sellers for a two-week window, the promise is made at announcement and the related commission revenue is recognized as orders complete, so the reduction tracks the orders. If the amount depends on how many shoppers redeem, it is variable consideration: estimate the redemption, apply the constraint, and true up at period end. The liability for credits issued but not yet redeemed is a point-in-time number on the balance sheet; the reduction of revenue is the flow for the period. Keep the two apart in the workpapers.

One payment type does not move. If the payee provides the entity a distinct good or service and the payment equals its fair value, it stays an expense. A seller that runs the platform's co-branded advertising campaign with proof of performance is the standard example. Only the excess over fair value, or the whole payment where fair value cannot be reasonably estimated, reduces revenue. That is current guidance and the proposal does not disturb it.

A worked example: one marketplace, three growth rates

Harbor Market is a marketplace that connects independent sellers with shoppers and charges sellers a 12% commission on each completed order. Sellers are Harbor's customers; shoppers are the sellers' customers. In the third quarter of 2026, gross merchandise value was $20,000,000, so commission revenue was $2,400,000. Cost of revenue, mainly payment processing and hosting, was $600,000. Marketing spend was $700,000, of which $300,000 was shopper credits that Harbor funded during two promotional windows it announced to sellers in advance. Other operating expense was $800,000. Operating income was $300,000. The figures are illustrative; the method is what carries.

Apply the two-prong test

Harbor's seller agreement does not promise credits, so there is no explicit promise. But Harbor publishes a promotion calendar to sellers each quarter, sellers price and stock around it, and Harbor has funded credits in every quarter since 2024. That is the implicit promise the proposal describes, and the credits are plainly an in-substance price concession on Harbor's commission: a seller who receives a $100 order carrying a $10 Harbor-funded credit nets more than one without it. Both halves of the second prong are met. The $300,000 is consideration payable to a customer.

Recompute the quarter

Then look at growth

Third quarter 2025 had gross merchandise value of $16,000,000, revenue of $1,920,000, and $120,000 of shopper credits in marketing. Gross merchandise value grew 25.0%. As reported today, revenue also grew 25.0%, from $1,920,000 to $2,400,000. If both years are presented on the proposal's basis, revenue grew 16.7%, from $1,800,000 to $2,100,000. If 2026 is presented on the new basis and 2025 is left as reported, which is what a modified transition without recast comparatives would produce, the board deck shows 9.4% growth in a quarter when order volume grew 25%. Nothing about the business changed between those three numbers. That is why a marketplace CFO should put gross merchandise value and a defined net revenue line in the deck now, before the standard forces the question, and why the transition approach deserves a comment letter from companies with growing promotion budgets.

The retailer version

Northgate Appliance advertises twelve months of interest-free financing on purchases over $999 and pays its financing bank a 3% merchant subsidy on each financed sale. Third quarter sales were $4,000,000, of which $1,200,000 was financed, so the subsidy was $36,000, booked today to bank charges in operating expense. The promise is explicit and made to the shopper, who is Northgate's customer, and the bank is paid on the shopper's behalf. Under the proposal, revenue is $3,964,000. With cost of goods sold of $2,800,000, gross margin moves from 30.0% to 29.4%, and operating income is unchanged. Northgate's bank covenant, which tests gross margin quarterly, is the first document to re-read.

Accounting controls for the customer-payment register

Source data: the general ledger detail for every account that could hold these payments, which usually means marketing, promotions, customer incentives, bank and merchant fees, interest expense, and cost of revenue; the customer contracts and any seller or dealer agreements; promotion announcements, calendars, and advertising that could create an implicit promise; the vendor master, tagged by whether each payee is a customer, a customer's customer, a party paid on a customer's behalf, or none of those; and the redemption data behind any issued credits.

Calculation: for each payment stream, record the payee class, the contract or communication that creates the promise, whether the payee gives the entity a distinct good or service and at what fair value, and the amount for the period. Sum the streams that meet the two-prong test into a single reclassification figure. Recompute revenue, gross margin, take rate, marketing as a percentage of revenue, and revenue growth under three cases: as reported, both years on the new basis, and current year only. Carry the unredeemed credit liability unchanged, and reconcile the period's reduction of revenue to the movement in that liability plus cash paid.

Review: a second reviewer agrees the register total to the ledger accounts it was drawn from, reads the contract clauses and promotion communications cited as the promise, challenges any payment classified as a distinct service by asking for the fair value evidence, confirms the reclassification leaves operating income unchanged, and confirms the comparatives in the board deck are labeled with the basis they are on. The reviewer also checks that the entity's principal-versus-agent conclusion is documented, because it decides who the customer is in the first place.

Decision: the CFO owns the accounting policy, the choice to file a comment letter by November 23, 2026, and the definition of net revenue the board and lenders will see. The controller owns the register and the quarterly recalculation. Marketing and sales own the promotion terms, and they need to know that a promise made to sellers in a newsletter is an accounting input. Write down who decided which streams meet the test, and on what evidence, because the auditor will ask in the first year the standard applies.

Limits and common mistakes

This is a proposal. FASB can change the wording, the examples, the transition, and the effective date after the November 23 comment deadline, and the final standard could differ from what is described here. Do not reclassify anything in reported financial statements on the strength of an exposure draft. Build the register, run the three cases, and keep them in the workpapers.

The test depends on who the customer is, and that depends on the principal-versus-agent conclusion. A platform that is principal in the sale to the shopper already treats shopper credits as a reduction of its own revenue today, because the shopper is its customer. The proposal matters for the agent model, where the seller is the customer and the shopper is the seller's customer. Get the Topic 606 analysis of the arrangement right first; the Topic 606 guide for QuickBooks Online users covers how that analysis tends to break down in a general ledger that was never built for it.

Covenants, earnouts, commission plans, and bonus targets written on revenue or gross margin do not care that net income is unchanged. A gross margin covenant tested quarterly can fail on a reclassification alone. The debt covenant compliance workflow describes how to run the covenant test on a pro forma basis before the lender does.

Not every payment to a third party is in scope. A payment that buys a distinct good or service at fair value stays an expense. A payment that is not connected to satisfying a promise to a customer is not consideration payable to a customer at all. And a payment that is already inside the distribution chain, such as a rebate to a distributor's customer who buys the entity's own product, is covered by existing guidance and is not what the proposal changes.

Finally, the ratios in the board deck must say which basis they are on. A growth rate that compares a current quarter on the new basis to a prior quarter on the old one is not a growth rate, and a board that discovers the mismatch after the fact will reasonably ask what else in the package was computed that way.

Frequently Asked Questions

What is consideration payable to a customer under ASC 606?

Consideration payable to a customer is cash, credit, or other items an entity pays or expects to pay to its customer, or to parties that buy the entity's goods or services from that customer. Under Topic 606 it reduces the transaction price, and therefore revenue, unless the payment is for a distinct good or service the customer provides at fair value.

What did FASB propose on October 22, 2026?

FASB proposed amendments to Topic 606 clarifying that payments made on behalf of a customer, or to a customer of the entity's customer, are consideration payable to a customer when made in connection with satisfying the entity's promise and either the entity explicitly promised the payment or the customer reasonably expects it because of an implicit promise or an in-substance price concession. Comments are due November 23, 2026.

Does the proposal change net income?

No. A payment that meets the test moves from an expense line to a reduction of revenue, so revenue and expenses fall by the same amount and operating income and net income are unchanged. Ratios built on revenue, including take rate, gross margin percentage, marketing as a percentage of revenue, and revenue growth, do change.

When would the change take effect?

No effective date has been set. The exposure draft is open for comment until November 23, 2026, and FASB will decide the effective date and final transition wording after redeliberating the comments. At its August 19, 2026 meeting the Board directed a modified prospective or modified retrospective transition approach and said the guidance would apply to all entities.

Which companies should run the test now?

Marketplaces and platforms that fund credits, rebates, or discounts for end users who buy from the platform's sellers; retailers and dealers that pay a bank or financing company so their customers get promotional financing; and any company that pays a third party as part of fulfilling a promise to a customer. Companies with revenue-based covenants, earnouts, or bonus plans should run it first.

A CFO who wants to see what the reclassification does to every revenue ratio needs the ledger detail behind the marketing, fee, and contra-revenue accounts in one place, with the ability to re-cut revenue by customer, product, and period on either basis. FinBoard reads the QuickBooks Online ledger into one reporting view, so a candidate payment stream can be tagged, moved, and traced from the board package back to the transactions that make it up. See how FinBoard rebuilds revenue reporting from ledger-level detail.