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    Accounting Standards Library

    Home >> Revenue Recognition Topics


    Bill and Hold

    A bill and hold transaction is one in which the seller does not ship goods to the buyer, but still records the related revenue. The Securities and Exchange Commission (SEC) does not like this type of transaction, and does not usually allow it, since revenue is normally only recognized when goods are shipped to the buyer.

    The SEC requires that all of following criteria be met before a bill and hold transaction will be allowed:

    • The risks of ownership have passed to the buyer
    • The buyer has committed in writing to buy the goods
    • The buyer has requested that the seller hold the goods, and has a business reason for doing so
    • There is a scheduled delivery date for the goods that is reasonable
    • There are no remaining obligations that the seller must complete
    • The goods cannot be used to fill orders from other customers, and so have been segregated
    • The goods must be complete

    To make matters even more difficult, the SEC points out that the following additional factors be considered:

    • The extent to which the seller is modifying its normal terms for this transaction
    • The seller's history of employing bill and hold transactions
    • The extent to which the buyer will lose if the market value of the held goods subsequently declines
    • The extent to which the holding risk of the seller can be insured
    • The extent to which the seller's holding of the goods really creates a contingent sale that the buyer could reject

    Related Topics

    Revenue recognition criteria
    What is accrued revenue?
    What is unearned revenue?
    What is unrecorded revenue?
    When can I recognize revenue?