How Revenue Is Recognized On Consignment Transactions

Physical possession is generally synonymous with control but there are situations like consignment arrangements where this is not the case.

How revenue is recognized on consignment transactions. In a bill and hold arrangement an entity sends a bill to the end customer for the final product but the customer requests that the product be held by the entity until a later date. Consignment accounting initial transfer of goods. Revenue from consignment arrangements should typically be recognized once the products are sold to the end customers consistent with when the entity relinquishes control. Consignment occurs when goods are sent by their owner the consignor to an agent the consignee who undertakes to sell the goods the consignor continues to own the goods until they are sold so the goods appear as inventory in the accounting records of the consignor not the consignee.

So if 100 items were consigned too a retailer. Performance obligations are satisfied and revenue is recognized when a customer obtains control of promised goods or services.