Consignment Revenue Recognition Rules under IFRS 15 Framework
Revenue on consignment inventory is deferred under IFRS 15 until control transfers to the end customer upon verified channel sell through.
Consignor Control Indicators
Meaning
Contractual and operational benchmarks determine whether a seller retains rights over product direction while inventory sits in a distributor warehouse. These consignor control indicators assess who sets the final retail price and who holds the risk of obsolescence during the storage period. They confirm the point at which the owner yields command to the intermediary.
Ownership Validation
Specific clues in the distribution agreement highlight whether the supplier orders the movement of stock or permits the agent to decide allocation. One common consignor control indicators element is the right to recall products without penalty before the sale occurs. This suggests the supplier remains the principal in the exchange.
Operational Restriction
Storage terms limit what a distributor can do with units without direct approval from the central source. Another set of consignor control indicators targets the responsibility for insurance or maintenance costs at the secondary site. Control ends when the agent takes full legal title or moves items beyond the reach of the original seller.
Compliance Boundary
Auditors examine these markers to confirm if revenue recognition should be deferred until the final consumer payout. The evidence gathered through consignor control indicators determines the balance sheet classification of the entire lot. Correct placement prevents incorrect earnings reports.