Why is reported sales higher using gross revenue reporting (vs. net) while profit is the same?
Gross revenue reporting is just reporting sales and COGS separately while net reporting shows the (Sales-COGS) amount instead of displaying the two items separately. Isn’t this the case?
Thank you for your help!
Hi Pomelo,
Net reporting shall be used if company is not undertaking any inventory risk or company is not deciding their suppliers or prices. In other cases, one need to use gross reporting.
Concept of net reporting and gross reporting mentioned by you is absolutely right.
Thanks and Regards,
Kailas Kale
Why then does exhibit 1 of Understanding Income Statements - Groupe Danone Consolidated Income Statement (in Millions of Euros) and exhibit 2 - Kraft Foods and Subsidiaries Consolidated Statements of Earnings (in Millions of Dollars, except Per-Share Data) show Net Revenues and the COGS straight after? Shouldn’t Net Revenues already include COGS?
I think there might be confusion between two different concepts here. Net revenue reporting can mean that a company is reporting gross revenue minus COGS.
However, when some financial statements refer to ‘net revenue’ or ‘net sales’ it can mean that they are making an allowance for customer returns and sales discounts.
Ok thanks, did some more reading on this, let me see if I have this right:
The top line of the income statement is always Gross Revenue, however you can report Gross Revenue using Revenue at Gross or Revenue at Net methods? The Revenue at Net method splits COGS into 2, subtracting COGS (which is effectively aimed at preventing double counting COGS on both your company’s statements and on the financial statements of your supplier) from Gross Revenue and arriving at Gross Revenue at Net and then you’ll need to subtract a different part of COGS which is specifically applicable to your business?