Bill and hold arrangements

Bill and hold arrangements occur when a customer orders goods but requests to delay taking delivery, while the seller bills the customer upfront. This setup is common in industries where delivery might be postponed due to logistical reasons. To recognize revenue accurately under accounting rules, the seller must meet specific criteria: the goods are identified and ready for delivery, the customer has acknowledged the arrangement, and no specific obligation requires immediate delivery. Properly managed, these arrangements ensure revenue is recognized at the appropriate time, reflecting the transfer of risks and rewards, rather than prematurely recognizing revenue before actual delivery occurs.