Logistics Visibility and Revenue Recognition

Logistics visibility can be a great tool in helping achieve timely revenue recognition. Many times a supply chain event such as shipping, border crossing or delivery will trigger revenue recognition. Knowing when these logistics events take place is the first step in booking sales timely.

Tips on Revenue Recognition

Title transfer is not directly linked to Incoterms®: 

• Incoterms® do not specify when title transfer takes place, any specifics written in the contract, purchase order or Letter of Credit will prevail over what is assumed.
• For instance, a shipment sold under the CIF states delivery takes place once the goods are placed on the vessel. However, the contact may state that title does not transfer until the goods arrive safely to the port of import.
• Ensure reliable records and formal documentation is kept as back-up in order to justify your revenue recognition.  Backup documentation will change depending on when the title transfer takes place, and could include: a bill of lading or air waybill, a customs entry or AES filing, or proof of delivery.

Do not expose your company or customer for the sake of sales recognition.  The penalties, fines, extra costs and legal problems can be costly.  Here is a list of unacceptable practices:

• Back-dating title documentation to make it seems as if something was picked up before it really was.
• Re-routing shipment to give false impression of transport, or changing Incoterms® or contract T&C’s at the last minute.

New Revenue Recognition Standards

Although not yet in effect, in May 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.This standard provides framework for how revenue will be recognized once guidelines are enacted.

The new standard provides a 5-step process to recognize revenue.

• Identify the contract with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognize revenue when (or as) each performance obligation is satisfied

 

Allyn International

As a solution, Allyn can help manage the revenue recognition needs of your company.

Allyn’s ALA system provides best in class tracking software that will help you meet all of the targets.  The tracking data can also be used to determine transit times, on time pickup and on time delivery.
ALA stores all documentation and will link it to the tracking data of your shipment. The data and documentation will be readily available via the Allyn’s ALA website, in a user-friendly searchable manner.
Allyn provides experts to assure that revenue is being recognized properly, with the goal of maximizing your benefits while minimizing your risk.  Allyn has supply chain, trade compliance and tax specialists that can help answer any question you may have on revenue recognition.

If you would like additional information on this or any other supply chain related matter, please contact Allyn at (239) 489-9900 or you can email us at sales@allynintl.com.

Allyn International Services, Inc. (Allyn) is a privately-owned supply chain management, tax and customs consulting firm established in 1992. Services comprise of supply chain & logistics management, global trade compliance and US tax compliance. Allyn offers customized solutions to meet your global needs with offices in Fort Myers, Fla., Shanghai, PR China, and Prague, Czech Republic.