Who reports consigned inventory on the balance sheet?

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AcadiFi · Accepted Answer

Consigned inventory remains on the consignor's balance sheet until the consignee sells it to an end customer. The consignee, despite holding physical goods, does not recognize them as inventory because control has not transferred. Example: Voyage Electronics (consignor) ships $42M of speakers to Crestline Retail (consignee). Crestline holds the goods on its shelves but Voyage keeps them in inventory. When Crestline sells $10M to consumers, Crestline remits proceeds minus commission to Voyage. Only at that sale does Voyage recognize revenue and reduce inventory; Crestline records commission income. Analytical implications: 1. The consignor's inventory days look high because physically remote goods still count. 2. The consignee's inventory days look artificially low because a meaningful portion of saleable stock is off its books. 3. Peer comparisons are distorted unless you normalize for consignment arrangements. ```mermaid flowchart LR A[Voyage
Ships Goods] --> B[Crestline
Holds] B --> C[Goods on
Voyage B/S] B --> D{Consumer
Sale?} D -->|Yes| E[Revenue to
Voyage] D -->|No| F[Stay with
Voyage] ``` Read the inventory footnote carefully; some firms disclose consigned amounts. If undisclosed but material, infer by tracking supplier financing footnotes and distribution agreements.

Who reports consigned inventory on the balance sheet?

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