Question:
Revenue recognition for most product sales that allow the right of return occurs at the point of product
delivery. Under what circumstances would revenue recognition be delayed?
Answer:
Because the return of merchandise can retroactively negate the benefits of having made a sale, the seller
must meet certain criteria before revenue is recognized in situations when the right of return exists. The
most critical of these criteria is that the seller must be able to make reliable estimates of future returns. In
certain situations, these criteria are not satisfied at the point of delivery of the product.
Revenue recognition for most product sales that allow the right of return occurs at the point of product
delivery. Under what circumstances would revenue recognition be delayed?
Answer:
Because the return of merchandise can retroactively negate the benefits of having made a sale, the seller
must meet certain criteria before revenue is recognized in situations when the right of return exists. The
most critical of these criteria is that the seller must be able to make reliable estimates of future returns. In
certain situations, these criteria are not satisfied at the point of delivery of the product.
