• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

sale or return contract

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › sale or return contract

  • This topic has 5 replies, 2 voices, and was last updated 2 years ago by Kim Smith.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • March 1, 2023 at 6:32 am #679839
    ABDULLAHI312
    Participant
    • Topics: 106
    • Replies: 97
    • ☆☆☆

    Hi,
    in the event of a sale or return contract, what will happen if the inventory held by the entity gets impaired due to a reason outside the entity’s control(i.e. changes in technology)?

    March 1, 2023 at 7:23 am #679851
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8294
    • ☆☆☆☆☆

    Do you mean sales with a right of return (for which the reporting entity should recognise a refund liability for the expected returns) or consignment contract (e.g. where distributor will return goods that are not sold on within a specified period)?

    March 1, 2023 at 10:30 am #679872
    ABDULLAHI312
    Participant
    • Topics: 106
    • Replies: 97
    • ☆☆☆

    sales with a right of return to which the entity is entitled to a refund. let me give my thought on what I was thinking:
    – control and risk of ownership not yet transferred to the purchasing entity- as this is achieved at the point of sale.
    – if impaired (reason outside their control), they got the right to return and will effectively claim the full amount at the value of inventory at the point of purchase from the supplier. it is the selling entity that suffers the hit.
    – if impaired(reason within their control), they got the right to return but this time they won’t get full compensation. the value of the receivable will be reduced by the impairment loss.

    Is this correct?

    March 1, 2023 at 3:34 pm #679887
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8294
    • ☆☆☆☆☆

    1. Sale with right of return is like a department store/website selling to retail customers who can return products if they are not happy with them within a specified period (may be statutory) – for the reporting entity, sales are sales, but provision is made for the best estimate of the liability (e.g. suppose 1% of sales are returned for whatever reason).

    2. I think you are talking about a consignment contract where there is no sale to the purchaser (“consignee”) until the purchaser (e.g. a car distributor) has sold the items and any unsold items are returned to the seller/manufacturer (“consignor”) when the period for which the goods were consigned has elapsed.

    If your reporting entity is the seller/manufacturer, consignment goods are inventory and would be written down if NRV is less than cost.

    March 1, 2023 at 5:01 pm #679907
    ABDULLAHI312
    Participant
    • Topics: 106
    • Replies: 97
    • ☆☆☆

    ooh, I got confused between the two.
    now all set.
    thanks.

    March 1, 2023 at 5:54 pm #679910
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8294
    • ☆☆☆☆☆

    Great!

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘sale or return contract’ is closed to new replies.

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • DuDE on Inventory Control (part 1) The EOQ Formula – ACCA Management Accounting (MA)
  • Nabiha on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • John Moffat on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • Bainamura on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • kadamova.f@gmail.com on Associates (IAS 28) – PUPs – ACCA Financial Reporting (FR)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in