Bill-and-Hold
A bill-and-hold arrangement is a contract under which an entity bills a customer for a product but retains physical possession of it until it is transferred to the customer at a later date.
Revenue Recognition
Explanation
Under ASC 606 and IFRS 15, revenue is recognized when control transfers. In a bill-and-hold arrangement, the customer can obtain control even though the product stays at the seller's site, but only if all of the following criteria are met:
• the reason for the arrangement is substantive, for example requested by the customer,
• the product is identified separately as belonging to the customer,
• the product is currently ready for physical transfer to the customer, and
• the entity cannot use the product or direct it to another customer.
The entity must also consider whether it provides a custodial service for the stored goods, which may be a separate performance obligation to which part of the transaction price is allocated. If the criteria are not met, revenue is deferred until physical delivery.
Why It Matters
Bill-and-hold is a classic audit focus because it can be used to pull revenue forward. In SAP, billing and goods issue are normally linked to delivery, so these arrangements need a defined process and documented evidence. In SAP RAR, the fulfillment event that drives revenue must reflect the transfer of control rather than the invoice.
Related Terms
Performance Obligation · ASC 606 · Deferred Revenue · Billing Document · SAP SD
Related Articles
• Deliveries and Goods Issue: Fulfillment Events and Revenue Timing
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