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Chapter 14 — Presentation

14.3 Refund Liabilities

14.3 Refund Liabilities

Some contracts with customers may result in refund liabilities owed to customers. The most common of such refund liabilities are return provisions in sales contracts that permit the customer to return the product if certain circumstances arise. These liabilities may also arise when an entity receives cash in advance, but the agreement is cancelable because of certain termination provisions in the agreement (see Section 4.4.1). When these provisions are present in a contract, the seller would recognize a liability to reflect its obligation to return amounts paid or payable by the customer (i.e., a refund liability).