When does a consignor recognize revenue in a consignment arrangement under IFRS 15?

Q: When does a consignor recognize revenue in a consignment arrangement under IFRS 15?

In a consignment arrangement, the consignor (manufacturer/supplier) ships goods to the consignee (retailer/dealer) but retains control until the consignee sells the goods to an end customer. Under IFRS 15, the consignor recognizes revenue only when the end customer obtains control -- NOT when goods are delivered to the consignee. **Indicators That an Arrangement Is Consignment (IFRS 15.B77):** - The product is controlled by the consignor until a specified event (sale to third party) - The consignor can require the return of unsold goods - The consignee does not bear the risk of obsolescence or price decline - The consignee has no unconditional obligation to pay until goods are sold **Worked Example -- Brixton Apparel (fictional)** Brixton ships 2,000 jackets (cost $40, wholesale $80 each) to Ridgeline Outfitters on consignment. By quarter-end, Ridgeline has sold 1,200 jackets to consumers at $130 retail. | Event | Brixton Revenue | Brixton Inventory | |---|---|---| | Shipment to Ridgeline (2,000 units) | $0 | $80,000 (2,000 × $40) | | Ridgeline sells 1,200 to consumers | $96,000 (1,200 × $80) | $32,000 (800 × $40) | | 800 unsold units at Ridgeline | Still consignment inventory | On Brixton's balance sheet | Brixton reports $96,000 in revenue and $48,000 in COGS for the 1,200 units sold through to consumers. The 800 unsold jackets remain in Brixton's inventory despite being physically at Ridgeline's stores. **Analyst Implications:** Companies using consignment models may show inflated inventory relative to peers because consigned goods stay on the consignor's balance sheet. If a company switches FROM consignment TO outright sales (selling to the retailer directly), revenue timing accelerates -- a red flag for quality-of-earnings analysis.

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AcadiFi · Accepted Answer

In a consignment arrangement, the consignor ships goods to the consignee but retains control until the consignee sells the goods to an end customer. Under IFRS 15...

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**Indicators That an Arrangement Is Consignment (IFRS 15.B77):**

- The product is controlled by the consignor until a specified event (sale to third party)
- The consignor can require the return of unsold goods
- The consignee does not bear the risk of obsolescence or price decline
- The consignee has no unconditional obligation to pay until goods are sold

**Worked Example -- Brixton Apparel (fictional)**

Brixton ships 2,000 jackets (cost $40, wholesale $80 each) to Ridgeline Outfitters on consignment. By quarter-end, Ridgeline has sold 1,200 jackets to consumers at $130 retail.

| Event | Brixton Revenue | Brixton Inventory |
|---|---|---|
| Shipment to Ridgeline (2,000 units) | $0 | $80,000 (2,000 × $40) |
| Ridgeline sells 1,200 to consumers | $96,000 (1,200 × $80) | $32,000 (800 × $40) |
| 800 unsold units at Ridgeline | Still consignment inventory | On Brixton's balance sheet |

Brixton reports $96,000 in revenue and $48,000 in COGS for the 1,200 units sold through to consumers. The 800 unsold jackets remain in Brixton's inventory despite being physically at Ridgeline's stores.

**Analyst Implications:** Companies using consignment models may show inflated inventory relative to peers because consigned goods stay on the consignor's balance sheet. If a company switches FROM consignment TO outright sales (selling to the retailer directly), revenue timing accelerates -- a red flag for quality-of-earnings analysis.

When does a consignor recognize revenue in a consignment arrangement under IFRS 15?

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