Bill-and-hold arrangement

A bill-and-hold arrangement is a contract under which an entity bills a customer for a product but retains physical possession of the product until it is transferred to the customer at a future point in time.

Keywords: Mazars, Thailand, Accounting, TAS 18, TFAC, FAP

16 September 2019

For example, a customer may ask a company to enter into such a contract because of the customer’s lack of space for the product, or because of delays in the customer’s production schedule.

Therefore, a bill-and-hold transaction is one in which the seller does not ship goods to the buyer, but still records the related revenue. Revenue can only be recognized under this arrangement when the following conditions have been met.

When is revenue under bill-and-hold arrangements recognised?

The entity should recognise revenue when it meets a performance obligation by transferring promised goods to a customer. The transfer occurs when a customer obtains control of the goods. Under a bill-and-hold arrangement, the customer does not immediately take physical possession of the goods, so it may be difficult to define when control is transferred to the customer.

If the entity needs to recognise the revenue under a bill-and hold arrangement, the guidelines on TAS 18 issued by the TFAC state that all of the following criteria must be met:

1. It is possible for the company to deliver the goods to the customer. For example, there is a scheduled delivery date for the goods that is reasonable.

2. The buyer has committed in writing to buy the goods. In addition, the buyer has requested that the seller hold the goods and has a business reason for doing so.

3. The credit terms that the entity gives to a bill-and-hold customer should be the same as those for other customers or for normal sales.

4. The product must currently be ready for physical transfer to the customer, and the entity cannot use the product or send it to another customer. In addition, the product must be identified as belonging to the customer.

For more information, please visit the FAP website