Allocation Discount Account

When contract assets are accrued as a right to invoice at the performance obligation values, but invoicing occurs at customer facing transaction values, the application provides the Allocation Discount account to help match the two values.

The allocation discount refers to the difference between the allocated amount and the invoice amount of a performance obligation. The application:

• Debits the Allocation Discount account in the case of a discount. In this case the allocated amount is more than the invoice amount.
• Credits the Allocation Discount account in the case of a premium. In this case the allocated amount is less than the invoice amount.

When an invoice corresponds to a performance obligation in every attribute except valuation, the application:

• Marks the right to invoice for that asset as exercised.
• Transfers the difference to the Discount Allocation account.

Subsequent invoices eliminate the difference, and the end of the contract shows a zero balance.