The 2014 financial statements of LVMH Moet Hennessey-Louis Vuitton S.A.LVMH is a Paris-based holding company and one of the world’s largest and best-known luxury goods companies. As a member-nation of the European Union, French companies are required to prepare their consolidated (group) financial statements using International Financial Reporting Standards (IFRS). Under IFRS, as is the case under U.S. GAAP, companies are required to disclose their accounting policies. In LVMH’s Notes to the Consolidated Financial Statements, the company discloses its revenue recognition policy:

Consider the following questions:

a. Describe LVMH’s revenue recognition policy.

b. Contrast LVMH’s revenue recognition policy with the policy that you would expect a retailer to use under U.S. GAAP.

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Revenue mainly comprises retail sales within the Group's store network and sales through distributors. Sales made in stores owned by third parties are treated as retail transactions if the risks and rewards of ownership of the inventories are retained by the Group. Direct sales to customers are made through retail stores... (and) are recognized at the time of purchase by retail customers. Wholesale sales through distributors... (are recognized) when title transfers to third-party customers, generally on shipment.