How should the revenue from entrepot trade be recognized? Come and help me answer this!
Solved#Entrepot trade#
Our company has recently been engaged in entrepot trade - related businesses and has some doubts about revenue recognition. We purchase goods from suppliers and directly transship them to the customer - designated location without passing through our company's warehouse. I would like to ask how the revenue from entrepot trade should be recognized in this case. Is it based on the amount of the signed contract or when the actual payment is received? I hope that professionals can help me answer this in detail, and it would be best to mention the key points to note during the revenue recognition process.
Professional consultant answers
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
The recognition of revenue from entrepot trade is usually based on the transfer of risks and rewards. When the control of the goods is transferred from the supplier to your company and then from your company to the customer, revenue can be recognized. Generally speaking, if the contract clearly stipulates that the goods are directly transshipped without passing through the company's warehouse, revenue is recognized when the following conditions are met after signing contracts with the supplier and the customer respectively to clarify the rights and obligations of both parties: First, the commodity sales contract has been signed, and the enterprise has transferred the major risks and rewards related to the ownership of the commodity to the buyer; second, the enterprise has neither retained the continuing management rights usually associated with ownership nor exercised effective control over the sold commodity; third, the amount of revenue can be measured reliably; fourth, the costs of the seller that have occurred or will occur can be accounted for reliably. During the revenue recognition process, attention should be paid to contract terms, such as the impact of the delivery location and payment method on the transfer of risks and rewards, and accurate cost accounting should be carried out to ensure the accuracy of revenue recognition.
William YangYears of service：5Customer Rating：5.0
International logistics consultantConsult
The recognition of revenue from entrepot trade can also focus on the goods delivery node. When the goods are delivered to the customer at the designated location and the customer acknowledges receipt, at this time, the risks and rewards have most likely been transferred, and revenue can be recognized. At the same time, keep the relevant delivery vouchers for subsequent financial accounting and auditing.
Jennifer WangYears of service：4Customer Rating：5.0
Market development consultantConsult
From the perspective of financial practice, if the credit sales method is adopted, although the actual payment has not been received, as long as the revenue recognition conditions are met, such as the goods have been delivered and the risks have been transferred, the revenue should be recognized based on the contract amount, rather than waiting until the payment is received.
Emily LiuYears of service：10Customer Rating：5.0
Settlement and payment expertConsult
When recognizing revenue from entrepot trade, the time of issuing the invoice also has reference value. When the sales invoice is issued to the customer as required and other revenue recognition conditions are met, revenue can be recognized. Attention should be paid to the consistency between the invoice and the actual business situation.
Sarah ZhangYears of service：8Customer Rating：5.0
Document expertConsult
The recognition of revenue from entrepot trade also needs to consider the risk assumption during the transportation process. If the risks during the transportation are borne by your company, revenue can only be recognized after the goods safely reach the customer - designated location and the risks are transferred.
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
If there are quality inspection clauses in the entrepot trade, it is more appropriate to recognize revenue after the customer completes the quality inspection and accepts the goods, indicating that the risks and rewards have truly been transferred.
Michelle ChenYears of service：3Customer Rating：5.0
Business coordination consultantConsult
Pay attention to the application of trade terms, such as FOB, CIF, etc. The risk transfer points are different under different terms, which will affect the revenue recognition time. Accurate judgment should be made based on the trade terms.
Amanda YangYears of service：3Customer Rating：5.0
Cost control consultantConsult
The confirmation of revenue can be assisted by tracking logistics information. When the logistics shows that the goods have been received by the customer, combined with other conditions, it can be used as a basis for revenue recognition.
Joseph ZhouYears of service：10Customer Rating：5.0
Senior foreign trade managerConsult
For the recognition of revenue from entrepot trade, it is also necessary to communicate with the supplier and the customer in a timely manner, understand the parties' recognition of the completion of the transaction, comprehensively judge the transfer of risks and rewards, and then accurately recognize revenue.