A supplier has agreed to pay a penalty (contractual) as they have accepted that they are at fault for late delivery of a project.
I'm not sure how I should treat this receipt in the accounts. Should I treat it as other/miscellaneous income, or set it against the costs of the project? I can see merit in both as;
* Treating as other/miscellaneous income keeps it separate from the project costs and is transparent in what it is for.
* Treating as a reduction in project costs makes sense because that's effectively what it is doing, but then it also disguises that there's a penalty involved.
I'm leaning towards treating as other/miscellaneous income, but wondering if there's a norm that is applied in these situations or is either approach ok?