Consignment, bill-and-hold and repurchase agreements under IFRS 15

In each of these arrangements the goods and the control over them are in different places. A dealer has the goods but not control, or the customer has control but not the goods, or the customer has the goods but the seller can take them back. IFRS 15 sorts them out by asking one question: who controls the asset?

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Under IFRS 15, goods delivered on consignment are not revenue until the dealer sells them on or otherwise obtains control, because the supplier still controls them. Bill-and-hold sales are revenue before delivery only if four strict conditions are met. Under a repurchase agreement where the seller has an obligation or right to buy the asset back, control has not passed, so the transaction is a lease or a financing arrangement rather than a sale.

At a glance

Consignment
Revenue on the onward sale
Bill-and-hold
Revenue only if four conditions met
Forward or call option
No sale: lease or financing
Repurchase below cost
Lease
Repurchase at or above price
Financing
Put option
Depends on customer incentive
Consignment, bill-and-hold and repurchase agreements under IFRS 15Consignment: Revenue on the onward sale; Bill-and-hold: Revenue only if four conditions met; Forward or call option: No sale: lease or financing; Repurchase below cost: Lease; Repurchase at or above price: Financing; Put option: Depends on customer incentive.KEY FACTS AT A GLANCEConsignment, bill-and-hold and repurchaseagreements under IFRS 15ConsignmentRevenue on the onwardsaleBill-and-holdRevenue only if fourconditions metForward or call optionNo sale: lease orfinancingRepurchase below costLeaseRepurchase at or above priceFinancingPut optionDepends on customerincentiveChecked against official sourcesTax BakersConsignment, bill-and-hold and repurchase agreements under IFRS 15Consignment: Revenue on the onward sale; Bill-and-hold: Revenue only if four conditions met; Forward or call option: No sale: lease or financing; Repurchase below cost: Lease; Repurchase at or above price: Financing; Put option: Depends on customer incentive.KEY FACTS AT A GLANCEConsignment, bill-and-hold andrepurchase agreements under IFRS15ConsignmentRevenue on the onward saleBill-and-holdRevenue only if four conditions metForward or call optionNo sale: lease or financingRepurchase below costLeaseRepurchase at or above priceFinancingPut optionDepends on customer incentiveChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

How is consignment stock treated?

Consignment: when the maker earns revenueConsignment: when the maker earns revenue1Maker shipsto dealerGoods sit inthe showroom2Maker stillcontrols themCan recall orredirect them3Dealer sellsto end customerDealer nowowes the maker4Revenuefor the makerRecognised onthe onward sale
Delivery to a dealer is not a sale while the maker still controls the goods.

Indicators that an arrangement is a consignment include: the product stays under the supplier's control until a specified event, such as the dealer's sale to an end customer; the supplier can require the goods back or move them to another dealer; and the dealer has no unconditional obligation to pay, although it may have to pay a deposit. The supplier keeps the goods in its inventory and recognises revenue when the dealer sells them or the consignment period ends.

A worked example: a car dealer

A manufacturer delivers 20 cars costing CU 30,000 each to a dealer. The dealer may return unsold cars at any time and pays the manufacturer CU 40,000 for each car only once it sells it. In the first month the dealer sells 6 cars.

Manufacturer, first monthCU
Revenue (6 cars x 40,000)240,000
Cost of sales (6 x 30,000)180,000
Cars still in the manufacturer's inventory, at the dealer (14 x 30,000)420,000

Had the dealer bought the cars outright with no right of return, the manufacturer would have recognised revenue for all 20 on delivery.

When is a bill-and-hold sale revenue?

The customer has paid or agreed to pay but asks the seller to keep the goods. Revenue is recognised before delivery only if all four conditions are met:

  1. There is a substantive reason for the arrangement, such as the customer's lack of warehouse space.
  2. The goods are identified separately as belonging to the customer.
  3. They are ready for physical transfer to the customer.
  4. The seller cannot use them or direct them to another customer.

If revenue is recognised, the seller considers whether its custodial service for the stored goods is a separate performance obligation that should receive part of the price.

How are repurchase agreements treated?

ArrangementTreatment
Seller must repurchase (forward) or may repurchase (call option), at a price below the original selling priceA lease under IFRS 16, unless part of a sale and leaseback
Forward or call option at a price equal to or above the original selling priceA financing arrangement: the asset stays on the seller's books and the cash received is a liability
Customer may require repurchase (put option) and has a significant economic incentive to use itA lease or financing, as above
Put option without a significant economic incentiveA sale with a right of return

In a financing arrangement, the difference between the selling price and the repurchase price is recognised as interest over the period.

Common mistakes

  • Recognising revenue when stock is shipped to distributors who can return it freely.
  • Treating every customer request to hold goods as bill-and-hold without checking the four conditions.
  • Recording a sale for equipment the seller has agreed to buy back.

Where to go next

For the general test of when control passes, see over time or at a point in time. For sales with a right of return, see variable consideration.

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Questions people ask

Is consignment stock revenue for the supplier?

Not on delivery to the dealer. Revenue is recognised when the dealer sells the goods on or otherwise obtains control.

When can a bill-and-hold sale be recognised as revenue?

Only when there is a substantive reason, the goods are identified as the customer's, they are ready for transfer, and the seller cannot use or redirect them.

How is a sale with an obligation to repurchase treated?

As a lease if the repurchase price is below the original price, or as a financing arrangement if it is equal to or above it.

What if the customer can require the seller to buy the asset back?

If the customer has a significant economic incentive to do so, it is a lease or financing; otherwise it is a sale with a right of return.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS 15Revenue over time or at a point in time under IFRS 15IFRS 15Variable consideration and the constraint under IFRS 15IFRS 15IFRS 15 revenue from contracts with customers explained

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This guide is general information. It is not tax or legal advice for your situation.