Consigned inventory

A retailer may physically display goods it does not own. Conversely, a manufacturer may own goods sitting in someone else's store. In a consignment, the consignee holds and may sell the goods, but delivery to that consignee does not by itself establish the consignor's sale or the consignee's purchase.

The close file therefore links each unit to the agreement, location, consignee sales report, customer transaction, return rights, commission, and settlement. The consignor's owned unsold units are added even when absent from its count; supplier-owned units are removed from the consignee's count even when present.

Do not stop at the word consignment. Identify who controls the product and when control can change. Check whether the supplier can require return or redirect the goods. Also determine whether the dealer has an unconditional payment obligation. ASC 606-10-55-79 through 55-80 prohibits revenue on delivery when the product remains on consignment and lists these indicators. The analysis concerns control; physical display, an advance deposit, or a proposed commission does not alone establish a sale.

At period end, the consignor keeps unsold controlled units in inventory and does not recognize customer revenue merely for delivery to the dealer. The consignee excludes those supplier-owned units from inventory and does not record a purchase merely for possession. Actual end-customer sales, returns, damage, commissions, and settlement require separate recording and cutoff evidence.

ASC 330-10-05-3 describes the reporting-date inventory balance as costs applicable to goods that remain. The consignment analysis determines which controlled goods remain in that balance; the paragraph does not turn custody into ownership.

Follow the worked rights ledger before attempting the independent reconciliation.