Bill-and-hold arrangements in IFRS 15

Bill-and-hold arrangements

Bill-and-hold arrangements occur when an entity bills a customer for a product that it transfers at a point in time, but retains physical possession of the product until it is transferred to the customer at a future point in time. This might occur to accommodate a customer’s lack of available space for the product or delays in production schedules. [IFRS 15.B79]

To determine when to recognize revenue, an entity needs to determine when the customer obtains control of the product. Generally, this occurs at shipment or delivery to the customer, depending on the contract terms (for discussion of the indicators for transfer of control at a point in time, see Performance obligations satisfied at a point in time from Step 5 IFRS 15 in the link). The new standard provides criteria that have to be met for a customer to obtain control of a product in a bill-and-hold arrangement. These are illustrated below. [IFRS 15.B80–B81]

Bill-and-hold arrangements

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IFRS 10 Principal versus agent considerations – Best complete read

Principal versus agent considerations

– Certain decision-makers may be obligated to exercise their decision powers on behalf of other parties and do not exercise their decision powers for their own benefit. IFRS 10 regards such decision-makers as ‘agents’ that are engaged to act on behalf of another party (the ‘principal’).

A principal may delegate some of its power over the investee to the agent, but the agent does not control the investee when it exercises that power on behalf of the principal (IFRS 10.B58).

Power normally resides with the principal rather than the agent (IFRS 10.B59). There may be multiple principals, in which case each of the principals should assess whether it has power over the … Read more

Transfer of control for distinct software licences

Transfer of control for distinct software licences – IFRS 15 provides additional application guidance to help entities determine when control transfers for distinct licences of intellectual property, based on the nature of the promise to the customer. This application guidance is applicable for both perpetual and term software licences.


IFRS 15 states that entities provide their customers with either:

Transfer of control for distinct software licences


If the licence does not meet all three criteria, the licence is a right to use by default and the entity would recognise revenue at the point in time when the licence is delivered.

The key determinant of whether a licence is a right to access is whether the entity is required to undertake activities that affect the licenced … Read more

Derecognition of financial assets – Best Guide IFRS 9

Derecognition of financial assets

Derecognition of financial assets has drawn a lot of attention in the Enron scandal. Enron used special purpose entities—limited partnerships or companies created to fulfil a temporary or specific purpose to fund or manage risks associated with specific (financial and/or non-financial) assets. Derecognition of financial assets

On October 16, 2001, Enron announced that restatements to its financial statements for years 1997 to 2000 were necessary to correct accounting violations. The restatements for the period reduced earnings by $613 million (or 23% of reported profits during the period), increased liabilities at the end of 2000 by $628 million (6% of reported liabilities and 5.5% of reported equity), and reduced equity at the end of 2000 by $1.2 Read more

1 Best guide Debt instruments at FVOCI

Debt instruments at FVOCI – A debt instrument is classified as subsequently measured at fair value through other comprehensive income (FVOCI) under IFRS 9 if it meets both of the following criteria:

  • Hold to collect and sell business model test: The asset is held withiSeries provision of distinct goods or servicesn a business model whose objective is achieved by both holding the financial asset in order to collect contractual cash flows and selling the financial asset; and
  • SPPI contractual cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

This business model typically involves greater frequency and volume of sales than the Read more

Construction contract – How 2 best account for it in IFRS 15

A construction contract is a contract specifically negotiated for the construction of (a combination of) assets that are closely interrelated in terms of design

Full derecognition with new assets liabilities best of 1

Full derecognition with new assets liabilities

Full derecognition with new assets liabilities is the ending of the derecognition decision tree in IFRS 9. It was decided in step 6 that the entity has NOT retained control of the asset.

The action to be accounted for is:

Full derecognition of a financial asset and continued recognition of liabilities retained (plus some new assets as consideration received)

An entity that derecognises a financial asset in its entirety includes the difference between the carrying amount of the asset less carrying amount of liabilities retained and the consideration received (including any cumulative gain or loss that had been recognised directly in equity through other comprehensive income i.e. recycling) in the income statement (profit or

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No alternative use enforceable payment right

No alternative use enforceable payment right for work to date is the last phase in the satisfaction of performance obligations in IFRS 15 Revenue recognition. This is part of a primary and fundamental subject in the recognition of revenue. There are two ways of recognising revenue, revenue recognition over time and revenue recognition at a point in time. Revenue recognition over time is often referred to as the ‘Percentage of completion‘ method under the (superseded) IAS 11 Construction contracts.

Revenue recognition at a point in time

The general principle is the revenue is recognised at a point in time (and as such it is the most common type of sales transaction at least in volume, just … Read more

Example financing component in a contract

Example financing component in a contract- This is an example of the workings of IFRS 15 60 – 64.

A vendor enters into a contract with a customer to build and supply a new machine. Control over the completed machine will pass to the customer in two years’ time (the vendor’s performance obligation will be satisfied at a point in time). The contract contains two payment options. Either the customer can pay CU 5 million in two years’ time when it obtains control of the machine, or the customer can pay CU 4 million on inception of the contract.

The customer decides to pay CU 4 million on inception. Example financing component in a contractExample financing component in a contract

The vendor concludes that … Read more

Transfer of control for distinct licences

Transfer of control for distinct licencesTransfer of control for distinct licences – IFRS 15 indicates that an entity must determine, at contract inception, whether it will transfer control of a promised good or service over time. If an entity does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. A performance obligation is satisfied over time if it meets one of the following criteria: Transfer of control for distinct licences

  • The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs – by providing hosting services, for example. Transfer of control for distinct licences
  • The entity’s performance creates or enhances an asset that the customer controls as the asset is created
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