What is Bill-and-hold arrangement?
In short
In a bill-and-hold arrangement, a seller bills a customer for a product but keeps physical possession of it until a later date. Revenue is recognized only when control has passed to the customer.
Key takeaways
- Control passes only if there is a substantive reason for the arrangement, the product is separately identified as the customer's, it is ready for transfer, and the seller can't use it or send it to another customer.
- The seller may have a separate performance obligation for custodial services.
- Auditors treat these arrangements as a fraud risk for early revenue recognition.
Where it's tested
BAR: Revenue for Specific Arrangements — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which of the following is NOT required before a seller recognizes revenue in a bill-and-hold arrangement?