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.
Risk of Loss Transfer
Meaning
Contractual points define the exact moment when the burden of property damage or destruction moves from a seller to a buyer. The risk of loss transfer determines which party must file insurance claims or absorb the cost if inventory is destroyed during transit. It aligns with specific shipping terms like Ex Works or Free On Board included in the distribution agreement.
Agreement Context
Negotiation between parties focuses on who maintains the safety of the cargo during the final mile of delivery. A risk of loss transfer occurs independently of legal title shift in some jurisdiction specific contracts. This separation allows a distributor to hold the risk even if the supplier still owns the stock identifiers.
Liability Boundary
Responsibility switches upon physical receipt or upon tender to a common carrier depending on the code used. In cases where the risk of loss transfer is deferred, the supplier remains liable until a signature confirms intake at the destination warehouse. This protects the buyer from paying for units that arrive non-functional or crushed.
Event Documentation
Tracking systems record the precise GPS timestamp and signature to finalize this obligation. Clear proof ends the window where the sender carries the cost of potential catastrophes. Signatures finalize the shift.