Enterprise confirming revenue in agency import and export business always makes mistakes, how should it be confirmed?

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My company is mainly engaged in agency import and export business, and I am recently confused about revenue recognition. Our business involves helping customers purchase goods and export them, or helping customers import goods. Sometimes the customer's payment time and the goods delivery time are inconsistent. I don't know which time to confirm revenue based on, whether it's when we receive the customer's payment, when the goods are delivered, or at other times? I hope everyone can give some professional advice on how to confirm revenue?
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Daniel Kim
Daniel KimYears of service：4Customer Rating：5.0

Commodity Inspection and Quarantine ConsultantStart a Chat

For enterprises engaged in agency import and export business, revenue confirmation generally follows the five-step model in Enterprise Accounting Standards No. 14 - Revenue (Revised 2017). First, identify the contract signed with the customer, clarifying the rights and obligations of both parties. Second, identify the distinct performance obligations in the contract. For example, if purchasing, transportation, and customs declaration can be clearly distinguished, they are different obligations. Third, determine the transaction price, considering factors such as variable consideration. Fourth, allocate the transaction price to each distinct performance obligation. Finally, recognize revenue when each distinct performance obligation is performed.

For the delivery of goods, if control is transferred to the customer, revenue recognition criteria are met, and revenue can be recognized at this time. If transportation, customs declaration, and other services are accounted for separately from the sale of goods, revenue is recognized when their respective performance obligations are fulfilled. If the timing of payment receipt and delivery differs from the timing of control transfer, revenue is recognized based on the timing of control transfer, and payments received and made are treated as receivables and payables.

References: Shocking! These Secrets Are Hidden in Changsha Furniture Export Agencies
Kevin Huang
Kevin HuangYears of service：3Customer Rating：5.0

E-Commerce Export AdvisorStart a Chat

Generally speaking, if the contract stipulates that the risk transfer point is when the goods pass the ship's rail, then revenue can be recognized when the goods pass the ship's rail, because at this point, the control of the goods has basically been transferred to the customer.

Anthony Luo
Anthony LuoYears of service：10Customer Rating：5.0

Trade Compliance ExpertStart a Chat

You can look at how the contract is signed. If it's agreed to deliver goods at the port of import, then revenue can be confirmed when the goods are delivered to the customer at the port of import. If it's not clear, refer to industry practices and standard regulations to find a reasonable time point for confirmation.

Linda Guo
Linda GuoYears of service：3Customer Rating：5.0

Trade Dispute MediatorStart a Chat

If it's a case of receiving payment before delivery, you should first record it as unearned revenue when you receive the payment. Then, when the control of the goods is transferred to the customer, for example, when the customer signs for receipt, you can then recognize the revenue.

Richard Wu
Richard WuYears of service：8Customer Rating：5.0

Global Trade Operations ExpertStart a Chat

In agency export business, when export goods have cleared customs and exited the country, and all relevant procedures are complete, and it is expected that the payment will be recovered, revenue can generally be recognized.

Michael Zhang
Michael ZhangYears of service：10Customer Rating：5.0

Customs Clearance SpecialistStart a Chat

In agency import business, if the goods have arrived at the designated location and have been accepted by the customer, it is more appropriate to recognize revenue at this time, indicating that the control of the goods has been transferred.

Olivia Liu
Olivia LiuYears of service：6Customer Rating：5.0

Foreign Exchange Risk ManagerStart a Chat

Pay attention to the transfer of risks and rewards. When the main risks and rewards related to the goods are transferred to the customer, such as the customer bearing the risks of goods loss or damage, revenue can be recognized.

Emma Zhao
Emma ZhaoYears of service：3Customer Rating：5.0

Export Documentation SpecialistStart a Chat

If the contract specifies an acceptance period, and the customer does not raise any objections after the acceptance period ends, it is relatively safe to recognize revenue at this time, indicating that the control of the goods has been transferred and they meet the customer's requirements.

Sophia Wang
Sophia WangYears of service：6Customer Rating：5.0

International Logistics CoordinatorStart a Chat

Look at the business substance. If the agency import and export business mainly involves collecting agency fees, then upon completion of the agency services, such as completing customs declaration procedures, revenue can be recognized at the amount of the agency fee.

User-submitted questions and answers reflect personal opinions, not the official stance of this website.

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