Bill-and-hold sales: verify control and custody separately
An invoice and a warehouse location do not determine whether a bill-and-hold sale has transferred control. Reconstruct the customer’s reason for delayed shipment, the identity of the goods and the seller’s remaining ability to redirect them. Then examine whether custody itself remains a separate promised service.
Separate control from physical movement
IFRS 15 centers relevant revenue recognition on satisfying performance obligations. Historical IFRS-aligned bill-and-hold detail is accessible in AASB 15, December 2022, B79–B82. That compilation specifies its Australian applicability period; the following commercial example is not a claim that one historical local edition governs all 2026 statements.
For the specific arrangement, inspect the substantive reason for holding, separate identification, readiness for physical transfer and whether the seller can use or redirect the product. Apply these together with the broader control assessment. Management’s description that goods are customer owned needs supporting facts, not merely a year-end invoice.
Hypothetical warehouse lots
Assume an order covers 100 finished instruments at 10 thousand each. The customer requests storage because its new facility is not ready. Eighty units are separately identified, ready to ship and unavailable for the seller’s other orders. Twenty still require essential calibration and can be substituted. These are fictional facts; assume all other relevant control conditions are met for the eighty.
The first eighty units may support analysis of transferred control, while the twenty require a separate conclusion. Recognizing the whole 1,000 simply because all units were invoiced would ignore the different facts. Conversely, automatically deferring all goods because they remain in the seller’s building would ignore the possibility of control without shipment.
Assume the consideration attributable to the eighty-unit arrangement is 800 and includes a distinct three-month custody service. Supported standalone values are 800 for the goods and 12 for custody. Relative allocation gives approximately 788.18 to goods and 11.82 to custody. After one month of evenly supplied custody, approximately 3.94 service revenue is earned and 7.88 remains.
| Evidence layer | Eighty units | Twenty units |
|---|---|---|
| Identified for customer | Assumed yes | Substitution possible |
| Ready for transfer | Assumed yes | Calibration incomplete |
| Seller can redirect | Assumed no | Assumed yes |
| Custody obligation | Examine separately | Does not cure unfinished goods |
All allocation figures are hypothetical. They demonstrate why the custody price cannot simply be ignored when assessing what remains to be performed.
Create a lot-level control worksheet
Use serial numbers or disclosed lot identifiers, customer request evidence, readiness date, restriction on substitution, payment rights, risk terms and the remaining storage promise. Record whether each fact is independently visible or only summarized by management. A photograph of goods on a shelf establishes location, not contractual control.
Reconcile quantities with shipment records when later available. Eventual shipment can corroborate the identity and timing of held goods, but it does not retroactively establish that every earlier condition was satisfied. A later refusal or substitution may instead expose a gap in the original description.
Watch for changes that defeat the explanation
Observable triggers include growing held inventory near period-end, seller-initiated storage requests, incomplete testing, broad substitution rights and long delays beyond the customer’s stated need. These are review triggers, not automatic findings of improper revenue. Preserve any difference between contractual rights and actual warehouse practice.
Public filings rarely disclose all lot evidence. The final note can therefore distinguish supported transferred-control quantities, unfinished quantities and unverified quantities. Do not assign zero to the unknown category or infer a precise adjustment merely because the warehouse total is known. The deliverable is a bounded control-and-custody assessment that directs the next evidence check.
Keep the eighty-unit custody allocation attached to that arrangement; do not extend its conclusion to the twenty unfinished instruments without another assessment.
FAQ
Does physical possession always determine revenue timing?
No. The relevant control facts and remaining obligations matter; location alone is insufficient.
Does later delivery validate every earlier bill-and-hold entry?
No. It can corroborate some facts, while readiness, identification and redirection rights still need evidence at the earlier date.