Assessing Consignment Stock Revenue Recognition under IFRS 15
Consignment stock revenue recognition requires verifying complete transfer of control under IFRS 15 B77 before moving inventory assets off balance sheet.
Unbilled Stock
Meaning
Shipped or delivered goods remain uncharged on seller accounting books pending invoice generation or contractual billing milestones. In distribution networks and vendor-managed inventory programs, unbilled stock represents inventory delivered to buyers where formal invoicing has not yet occurred. Revenue recognition rules require unbilled amounts to be tracked as accrued revenue or unbilled receivables until billing completes.
The accounting classification ends when sales invoices are formally generated and transferred to trade accounts receivable.
Invoicing Lag
Operational delays or milestone-based contract terms often separate physical shipment from invoice creation. When goods enter buyer custody before billing, unbilled stock requires balance sheet tracking to prevent unrecorded revenue leakage. Warehouse management systems log physical shipments and flag unbilled balances for finance teams.
Automated system controls trigger billing routines once delivery confirmations or consumption reports are processed.
Contractual Framework
Master supply agreements regulate the maximum allowable time between physical delivery and billing execution. In consignment arrangements or pay-from-scan models, inventory contracts specify that stock remains unbilled stock until the customer consumes or resells the inventory. Clear terms mandate periodic inventory consumption reporting to enforce timely billing cycles.
Working Capital Impact
Extended billing delays stretch cash conversion cycles and increase unbilled working capital exposure. Resolving unbilled stock promptly ensures timely revenue collection and protects vendor liquidity.