Technology consignment arrangements

Entities may deliver inventory on a consignment basis to other parties (e.g., distributor, dealer). By shipping on a consignment basis, consignors are able to better market products by moving them closer to the end-customer. However, they do so without selling the goods to the intermediary (consignee). Technology consignment arrangements

Entities entering into consignment arrangements must determine the nature of the performance obligation (i.e., whether the obligation is to transfer the inventory to the consignee or to transfer the inventory to the end-customer). Under IFRS 15, this determination is based on whether control of the inventory has passed to the consignee upon delivery. Typically, a consignor will not relinquish control of consignment inventory until the inventory is sold to the end-customer or, in some cases, when a specified period expires. Consignees commonly do not have any obligation to pay for the inventory other than to pay the consignor the agreed-upon portion of the sales price once the consignee sells the product to a third party. As a result, revenue generally would not be recognised for consignment arrangements when the goods are delivered to the consignee because control has not transferred (i.e., the performance obligation to deliver goods to the customer has not yet been satisfied). This result is generally consistent with conclusions under IFRS requirements in IAS 181.

Technology consignment arrangements Technology consignment arrangements Technology consignment arrangements Technology consignment arrangements

Consignment is an arrangement in which goods are left in the possession of an authorized third party to sell. Typically, the consignor receives a percentage of the revenue from the sale (sometimes a very large percentage) in the form of a commission.

Consignment deals are made on a variety of products, such as artwork, clothing and accessories, and books. Some types of retail sales may be viewed as a special form of consignment where producers rely on retail stores to sell their products to consumers, although secondhand stores and thrift stores are more typically associated with the practice of consignment.

Leave a Reply

Your email address will not be published. Required fields are marked *