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.
IFRS 15 Paragraph B77
Meaning
Regulatory guidance specifies the conditions under which a seller recognizes revenue in arrangements where a distributor holds products for secondary resale. IFRS 15 paragraph b77 identifies factors such as the right to return items or the distributor’s obligation to pay only after a sale. It helps determine if a transaction is a genuine sale or a mere movement of goods into storage.
Control Assessment
Indicators focus on whether the intermediary has the physical ability to direct the use of the inventory. According to IFRS 15 paragraph b77, the absence of unconditional payment obligations suggests that control has not truly moved from the source. The analysis looks for specific contractual barriers that prevent the distributor from acting as the legal principal.
Recognition Trigger
Revenue stays off the books until the final transfer logic is satisfied. Documentation referencing IFRS 15 paragraph b77 confirms that items held at an intermediary site remain part of the consignor inventory. This prevents early earnings reporting that could mislead participants about the actual velocity of goods.
Audit Accuracy
Misapplying this section often results in significant financial restatements later in the year. Precise contract wording ensures the revenue recognition aligns with the delivery of performance obligations. Compliance verifies the true state of sales.