Bill and hold agreements

In a bill-and-hold arrangement, the seller holds on to the goods at the request of the customer. The seller does not wait until the goods are physically transferred provided that the goods have been set aside for the customer, are ready to be transferred and cannot be directed to another customer.

IFRS 15 refers to the transfer of the risks and rewards of ownership as only one of the factors to be considered when deciding whether a performance obligation has been satisfied at a point in time. The seller could recognise revenue for a bill-and-hold arrangement even if it bears the risk of damage (for example). The key determinant of satisfaction of a performance obligation is the transfer of control – so if only the buyer can direct the subsequent movement of the goods there may be a sale even if risk(s) remain with the seller.