right of return

Dictionary of Accounting Terms for: right of return
right of return

option of purchaser to give goods back to the seller for full credit. The buyer’s right to return merchandise precludes revenue recognition by the seller at the time of sale unless all of the following conditions are met: (1) selling price is determinable; (2) buyer’s obligation to pay is not contingent on resale of the product; (3) buyer must pay for item if lost; (4) acquisition by buyer has economic substance; (5) future performance by seller is not required for resale by buyer; and (6) future returns may be reasonably estimated. If these conditions are not satisfied, revenue and related expenses must be deferred until the conditions are met or the right of return has expired.

Dictionary of Business Terms for: right of return
right of return

option of purchaser to give goods back to the seller for full credit.

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