A seller may recognize revenue when the production of the goods is complete if the buyer requests that the transaction be on a "bill and hold" basis and has a substantial business purpose for such a request.

Question

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According to the revenue recognition principle, revenue can be recognized when the seller has performed its obligations under the contract and the buyer has accepted the goods or services. In the case of a bill and hold transaction, the buyer requests that the goods be produced and invoiced but held by the seller until a later date for delivery. If the buyer has a substantial business purpose for such a request, revenue can be recognized when the production is complete as the seller has performed its obligations and the buyer has accepted the goods on a constructive basis. However, there are certain criteria that need to be met for revenue recognition in a bill and hold transaction, as outlined in ASC 606-10-55-70.

A Seller May Recognize Revenue When the Production of the Goods