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60I'm looking for some operational and accounting advice on how to handle a specific co-processing arrangement.
A few years ago, we shifted our co-processing from a traditional tolling model (moving inventory via work orders and paying a processing fee) to a turnkey "buy/sell" model. We now officially "sell" the raw product to our co-processor and then "purchase" the finished goods back from them.
Operationally, we still want to send an invoice to the co-processor for the initial transfer. However, per US GAAP (ASC 606 and ASC 470-40), we cannot record this transaction as true income, as it's essentially a financing/tolling arrangement in substance.
My question is: How do you operationalize this in your ERP?
We want to continue generating the invoice for the co-processor, but we need a mechanism to record the "revenue" and "COGS" so that it complies with GAAP and doesn't artificially inflate our top line. Do you use specific clearing accounts, non-revenue item codes, or a different systemic workaround?
Any insights into how you've structured this would be greatly appreciated!
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