Virtually any product and service can be traded. Examples are:
- Hospitality Inventory: Corporate barter with IMS allows the hospitality industry to convert unsold hotel rooms, meeting rooms, airline seats, cruise cabins, or restaurant tables into products that are currently purchased on a cash basis.
- Excess/Closeout Inventories: IMS enables companies to move excess and closeout inventories at up to their full wholesale values.
- Excess Production Capacity: Participating in IMS' corporate barter program allows manufacturers to increase production runs, thereby improving plant and overhead efficiencies.
- Depreciated Assets: IMS Corporate Barter can help boost the value from accounts receivables, equipment leases and real estate that have significantly depreciated in value.
Reputable barter companies recommend that clients account for the revenues and profits from their barter transactions as outlined by the following rulings:
The Accounting Principles Board (APB) Opinion No. 29 includes pronouncements that are generally applicable to corporate barter transactions. Financial Accounting Standards Board (FASB) also specifically addressed the accounting of barter transactions in 1993 with EITF Abstract 93-11. Additionally, the SEC provides an overview on the accounting of barter with SAB101.
Essentially, these rulings state that barter cannot be used to avoid writing down the value of a depreciated asset. A barter transaction cannot really alter the value of an asset simply because more is paid for that asset. With this in mind, barter should not be viewed as an accounting solution, but rather as an economic recovery tool that can only be realized as the trade credits received from the barter transaction are actually utilized and the client receives value. The above rulings presume that only the actual value of the asset being traded can be determined. The value of the trade credit, on the other hand, can only be determined after it is utilized.
IMS recommends that clients write down the asset being sold in exchange for trade credits at its fair market value and record the economic gain received as the trade credits are spent. The only exception would be with clients who have a historical record of trade credit redemption that can be used to demonstrate its value. (See EITF 93-11)
The corporate barter model is for large-scale transactions, while retail barter is characterized by transactions of more modest values.
At IMS, we provide the optimum scenario that allows our business partners to benefit from both retail and corporate barter.
Businesses that want to utilize corporate barter should recognize that corporate barter does not present any additional tax advantages or disadvantages: Barter and cash transactions hold the same value in the eyes of the U.S. Internal Revenue Service and other tax authorities and both are taxed equally. Corporate barter companies must report goods and services sold through barter to the IRS.
The simple answer is because it's perishable. Barter allows you the opportunity to turn this perishable inventory into value.
Here's a quick example of how a 300-room property with an 80% occupancy level and assuming a $200 ADR can benefit from trade:
300 (rooms) X 365 (nights per year) = 109,500 total room nights
80% occupancy = 87,600 (room nights sold)
21,900 (number of unsold room nights) X $200 = $4,380,000 (lost value)
Trading a portion of this unsold inventory dramatically improves your bottom line.
Quite simply, IMS Corporate Barter gives your business the opportunity to gain more revenue than normal liquidation channels offer. IMS allows you control over where your inventory is rechanneled.
As volume and availability of excess inventories vary throughout the year, partnering with IMS Corporate Barter offers a profitable solution for your distressed inventory.