consignment stock

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Stock held by one party (the dealer) but legally owned by another; the dealer has the right to sell the stock or to return it unsold to its legal owner. It is sometimes difficult to distinguish between the commercial realities of the transaction and the legal agreement. In accounting it is important that the concept of substance over form is applied and that the financial statements reflect the commercial reality. The Accounting Standards Board issued Financial Reporting Standard 5, Reporting the Substance of Transactions, to resolve these issues.

Subjects: Accounting.

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