It is mentioned that the company is engaged in re-export trade business, purchasing from abroad and selling directly to other overseas customers without passing through China. The company is unsure whether to include re-export trade income in operating revenue, other business revenue, or other accounts. The best answer indicates that if re-export trade is the company's main operating business, it should generally be included in "operating revenue," which complies with accounting principles and financial and tax treatment requirements. If it occurs occasionally, it can also be considered to be included in "other business revenue."
How to Recognize Revenue in Re-export Trade? Come and Share Your Advice!
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Our company has recently started engaging in re-export trade business, and we are somewhat confused about revenue recognition. Unlike general trade, re-export trade does not involve direct sales of goods; the goods do not pass through our domestic territory but are shipped directly from the supplier to the end customer. In this situation, when should revenue be recognized? Should it be based on the signing of the contract, or on the delivery of goods to the end customer? Or are there other recognition criteria? We hope knowledgeable friends can provide a detailed explanation.
Trade Expert Insights Answers
Daniel KimYears of service：4Customer Rating：5.0
Commodity Inspection and Quarantine ConsultantStart a Chat
In re-export trade, revenue recognition typically follows the provisions of Enterprise Accounting Standard No. 14 - Revenue (Revised 2017), adopting the five-step model to recognize revenue.
First, identify the contract with the customer, which must meet conditions such as commercial substance. Second, identify the distinct performance obligations in the contract, such as providing re-export trade goods delivery services. Then, determine the transaction price, which is the revenue amount stipulated in the re-export trade contract. Next, allocate the transaction price to each distinct performance obligation. Finally, recognize revenue when each distinct performance obligation is satisfied.
Generally, it is more reasonable to recognize revenue when control of the goods is transferred to the end customer, such as when the goods have been delivered to the end customer's designated location, and risks and rewards have been transferred. This accurately reflects the enterprise's operating results.
Emma ZhaoYears of service：3Customer Rating：5.0
Export Documentation SpecialistStart a Chat
Generally, revenue is recognized upon delivery of goods to the end customer and the transfer of risks and rewards, which ensures the authenticity of revenue recognition. If the goods are not delivered, even if a contract is signed, the risks remain with oneself, and recognizing revenue would not be appropriate.
Linda GuoYears of service：3Customer Rating：5.0
Trade Dispute MediatorStart a Chat
It also depends on the contract terms. If the contract explicitly specifies a particular event as the revenue recognition point, such as customer acceptance, then follow the contract. However, delivery and transfer of risks usually remain the primary factors.
Richard WuYears of service：8Customer Rating：5.0
Global Trade Operations ExpertStart a Chat
It is important to retain relevant evidence, such as shipping documents and customer receipt records. These are crucial for determining the timing of revenue recognition and facilitate subsequent audits and other verifications.
Kevin HuangYears of service：3Customer Rating：5.0
E-Commerce Export AdvisorStart a Chat
One can refer to industry practices. Most similar re-export trade enterprises recognize revenue when control of the goods is transferred. Following this approach helps avoid errors.
Robert TanYears of service：5Customer Rating：5.0
International Market Development AdvisorStart a Chat
If quality assurance clauses or other factors affecting the transfer of risks and rewards are involved, a comprehensive assessment is required. One cannot solely look at delivery; risks are only fully transferred when there are no quality issues.
David ChenYears of service：10Customer Rating：5.0
Trade Compliance AdvisorStart a Chat
Finance and business departments should communicate more. Business personnel understand the actual transaction process, and finance relies on this information to determine revenue recognition timing according to standards. Good cooperation ensures accurate recognition.
Thomas LiYears of service：7Customer Rating：5.0
Import Licensing AdvisorStart a Chat
Consider tax implications. Different revenue recognition times may affect the timing of tax obligations, so it is important to balance accounting standards and tax regulations to avoid tax risks.
Michael ZhangYears of service：10Customer Rating：5.0
Customs Clearance SpecialistStart a Chat
If return clauses exist, the likelihood of returns must be estimated, and revenue should be recognized within a reasonable scope. Any potentially returnable portion cannot be fully recognized as revenue.