How should the revenue from entrepot trade be accurately recognized? Come and share your experiences!
Solved#Entrepot trade#
Our company has recently been involved in the entrepot trade business, and we are not quite clear about the revenue recognition part. We purchase goods from suppliers and sell them directly to foreign customers without processing in the country. I would like to know what the standard for revenue recognition is in this case? Is it based on the contract signing time, the delivery time of goods, or other methods? I hope friends with experience can explain it in detail. Thank you very much!
Professional consultant answers
James LiuYears of service：10Customer Rating：5.0
Foreign trade tax refund consultantConsult
The recognition of entrepot trade revenue usually follows the provisions in Accounting Standards for Business Enterprises No. 14 - Revenue (Revised in 2017) and adopts the transfer of control model. Generally speaking, when an enterprise has the right to receive payment for the goods currently, the main risks and rewards of the goods have been transferred to the customers, and the customers have accepted the goods and other conditions are met, the revenue can be recognized.
Specifically for entrepot trade, if the contract stipulates that the goods are directly shipped from the suppliers to foreign customers and the risks are transferred to the customers when the goods are handed over to the carrier, then when the goods are handed over to the carrier and at the same time it is highly likely that the relevant economic benefits will flow into the enterprise and the amount of revenue can be reliably measured, the revenue can be recognized.
In addition, attention should be paid to collecting relevant evidence, such as transport documents, acceptance certificates, etc., to support the rationality of revenue recognition.
Jennifer WangYears of service：4Customer Rating：5.0
Market development consultantConsult
Generally, it depends on how the contract stipulates the transfer of risks. The revenue is recognized at this time point. If it is not clearly specified, usually the revenue is recognized when the goods are delivered to the party designated by the customer.
Elizabeth LiYears of service：3Customer Rating：5.0
Compliance and risk managerConsult
I think we also need to pay attention to the transfer situation of the goods' ownership certificates. Once the certificates are transferred, the revenue can basically be recognized, which represents the transfer of control.
Emily LiuYears of service：10Customer Rating：5.0
Settlement and payment expertConsult
Revenue recognition also needs to be combined with the situation of payment and receipt of funds. If the customer has already paid most of the funds, that is also an important reference point for revenue recognition.
Amanda YangYears of service：3Customer Rating：5.0
Cost control consultantConsult
Look at the trade terms, such as FOB, CIF, etc. The time of risk transfer is different under different terms, which has an impact on the time of revenue recognition.
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
It is necessary to ensure that the cost can be reliably measured. Otherwise, even if other conditions are met, there may be problems with revenue recognition.
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
The relevant commercial substance must exist. If the transaction does not conform to commercial logic, the revenue recognition may not be recognized.
Robert ChenYears of service：6Customer Rating：5.0
Customer service consultantConsult
Pay attention to whether there are any unexpected situations during the transportation of the goods, such as damage, etc. This may affect the transfer of risks and thus affect revenue recognition.
William YangYears of service：5Customer Rating：5.0
International logistics consultantConsult
The communication with customers and suppliers is also very important. Timely understanding of the status of the goods helps to accurately recognize revenue.