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5. This year, Sassoon Ltd has started to explore the mainland market by sending goods on a consignment basis to a number of pharmacies in Shenzhen. The respective pharmacies produce a monthly sales report for Sassoon Ltd which uses the information to recognize monthly revenue as well as the basis for invoicing the pharmacies. The industry standard credit period of 60 days from the invoice date is given to the pharmacies. The consignment inventory of HK$2,000,000 is included in the year-end inventory which represents about 10% of the total inventory. Sassoon Ltd recognizes $6,000,000 of revenue from consignment sales for the year which represents about 10% of the sales revenue for the same period.
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