Consignment Stock Control Criteria under International Financial Reporting Standards
Consignment stock remains on the supplier balance sheet until downstream control transfers through verified consumption or resale under IFRS 15 criteria.
Landed Cost Accounting
Meaning
Financial calculation methodologies aggregate all expenses incurred to manufacture, transport, and deliver a product to its final destination. In international distribution agreements, landed cost accounting determines the true profitability of importing goods by combining the factory gate price with freight, duties, taxes, insurance, and local handling fees. This comprehensive cost view prevents companies from underpricing products in new territories or overestimating the returns from overseas sourcing.
Cost Allocation
Finance departments use import documentation to allocate freight charges and custom duties to individual stock keeping units. Accurate landed cost accounting ensures that indirect transport expenses are not simply dumped into overheads but are instead factored into product unit costs. This precision is necessary when distributing low-margin goods across long distances.
Pricing Strategy
Wholesalers must calculate their total landed cost before setting wholesale and retail prices in target markets. Utilizing landed cost accounting prevents the company from selling goods at a nominal profit that turns into an operational loss once transport fees are added. This valuation serves as the basis for calculating minimum acceptable selling prices in distribution contracts.
Sourcing Evaluation
Sourcing agents compare domestic and international supply options by analyzing their respective total delivered costs. Through landed cost accounting, the financial benefit of cheap overseas manufacturing can be weighed against long transit times and higher tariff risks. Companies use these comparisons to decide whether to bring production closer to their main distribution centers.