---
title: Right of Return
description: A customer's contractual right to return a product and receive a refund, credit, or exchange. Companies must estimate expected returns and recognize a...
sidebar_position: 14
tags: ['asc-606', 'Revenue']
---

# Right of Return

## The ASC 606 Standard

A customer's contractual right to return a product and receive a refund, credit, or exchange. Companies must estimate expected returns and recognize a corresponding refund liability rather than total revenue.

## The Real-World Scenario

You sell 10,000 hardware devices to a retailer, but their contract gives them 60 days to return any unsold units for a full refund.

## The Spreadsheet Breaking Point

Trying to manually adjust revenue schedules daily based on fluctuating historical return data and actual returns is an administrative nightmare.

## The Hidden Cost to the Bottom Line

Ignoring return liabilities overstates top-line revenue and leaves the company exposed to sudden cash flow crunches when refunds hit.

## How GAAPX Eliminates the Risk

Automatically calculates historical return rates, sets up the exact refund liability, and adjusts recognized revenue dynamically.