Paragraph 1 of the Appendix to IAS 18 discusses bill-and-hold sales. It states that “revenue is recognized when the buyer takes title.” Also, delivery needs to be probable; the inventory must be ready for shipment, on hand, and identifiable; the buyer must specifically acknowledge the deferred delivery; and agreement must have been reached on payment terms. The lower IFRS thresholds are that (1) delivery must merely be probable (as opposed to the GAAP fixed delivery schedule) and (2) the buyer must specifically acknowledge the arrangements (as opposed to the GAAP requirement of initiation by the buyer). Consequently, the revenue recognition criteria under IFRS may enable firms to recognize revenue before the goods have been shipped.
Under U.S. GAAP at the time of this case, it was not considered appropriate to recognize revenue until the product had been delivered to the buyer or there was a fixed delivery schedule. In this...
