Reference no: EM131338147
Bill-and-hold arrangements (ASC 606)
Consumer product manufacturing entities may have bill-and-hold arrangements with their customers whereby the entities bill customers for goods, but do not deliver those goods until a later date. Retailers may have similar arrangements whereby customers are offered layaway services. Entities can currently recognize revenue when product is billed (rather than on delivery) if the arrangement meets certain criteria.
Example 1 – Bill-and-hold arrangement
Facts:
Playgineering, a real time video playback company, enters into a contract to supply 100,000 interactive touch screen tablets to a Globuss, an electronics retailer. The contract contains specific instructions from the Globuss about where the tablets should be delivered. Playgineering must deliver the tablets in the next year at a date to be specified by Globuss. Globuss expects to have sufficient shelf space at the time of delivery. As of year-end, Playgineering has inventory of 120,000 tablets, including the 100,000 relating to the contract with Globuss. The 100,000 tablets are stored with the other 20,000 game consoles, which are all interchangeable products; however, Playgineering will not deplete its inventory below 100,000 units.
When should Playgineering recognize revenue for the 100,000 units to be delivered to Globuss?
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