Does the agreement include consignment provisions or there are indicators that the agreement is a consignment of the related product(s)?

When a product is delivered to another party with the purpose of being resold to an end customer, the reporting entity must evaluate whether control has transferred. For products that are held on consignment control may not have transferred, and the reporting entity would not be entitled to recognize revenue.

There are certain Indicators that must be evaluated to determine if control has transferred. Indicators that suggest control has not transferred include, but are not limited to, the following:

  1. The product is controlled by the reporting entity until a future event occurs, such as its subsequent sale to a customer of the dealer, or the expiration of a specified time.
  2. The reporting entity can require the counterparty to return the product, or transfer it to a third-party.
  3. The recipient of the product does not have an unconditional obligation to pay for the product.

ASC 606-10-55-79 thru 80

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