Bill and hold

A bill and hold transaction occurs when a company recognizes revenue before delivery takes place. Normally a revenue is not recognizable until goods are delivered or services are rendered.[1] Exceptions are made when a customer specifically requests that the vendor delay delivery and has a legitimate business reason for the request.[2]

Alleged abuse by Nortel

Nortel Networks Corporation was a multinational telecommunications equipment manufacturer headquartered in Mississauga, Ontario, Canada. During and right after the optical boom years, Nortel allegedly used bill and hold transactions[3] to inflate the company’s revenues during some quarters, allowing company executives to earn millions in bonuses.

References

  1. ↑ http://www.sec.gov/interps/account/sab101.htm
  2. ↑ http://answers.google.com/answers/threadview/id/603220.html
  3. ↑ http://www.theglobeandmail.com/report-on-business/ex-nortel-ceo-john-roth-says-hes-cleared/article87339/
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