What defines bill-and-hold transactions in accounting?

Bill-and-hold transactions are characterized by the billing of customers for goods that are not physically transferred to them at the time of billing. This occurs when a seller recognizes revenue from a sale even though the buyer has not yet received the goods. For a transaction to qualify as a legitimate bill-and-hold arrangement, specific criteria must be met: the goods must be clearly identified as belonging to the buyer, the buyer must have requested the arrangement, and the seller must have a finite timeframe for shipping the goods.

This contrasts with situations where goods are shipped before billing, which does not align with what constitutes a bill-and-hold arrangement. Likewise, customer cancellations or indefinite storage of goods do not accurately describe the essence of this type of transaction, as they imply a failure in the sales process rather than the proper recognition of revenue under specific circumstances.