In a Consignment Arrangement, Revenue Typically Should Not Be Recognized

question 279

True/False

In a consignment arrangement, revenue typically should not be recognized until sale to a third party occurs, even though there has been a physical transfer of goods to the consignee, because the consignor still retains legal title to the goods.

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Definitions:

Unrealised Profit

Profit that has been generated on paper through an increase in the value of an asset but has not yet been realized through a sale.

Investor's Share

The portion of an investment's returns or an enterprise's profits allocated to an investor, based on the ownership percentage.

Asset Revaluation Surplus

Excess amount by which an asset's carrying amount is increased upon its revaluation, reported in equity under other comprehensive income.

Investment in Associate

An investment in associate refers to an investment in another entity where the investor has significant influence, usually indicated by owning 20% to 50% of the voting stock, but not control, over the investee.