If a company sells its product but gives the buyer the right to return the product,IASB (2011)requires revenue from the sales transaction to be recognised at the time of sale.

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According to IAS 18 Revenue, revenue from sales transactions should only be recognized when the seller has transferred the significant risks and rewards of ownership to the buyer, and it can be reliably measured. In the case where a customer has the right to return a product, the revenue should only be recognized when it is probable that the return will not occur. Therefore, revenue recognition in this scenario will depend on the seller's ability to estimate the likelihood of return accurately.

If a Company Sells Its Product but Gives the Buyer