BOP Program Statement 8531.14 § 7

These contracts are defined as sales agreements that include one or more clauses requiring the

seller to maintain physical possession of merchandise produced for one or more customers. It is

FPI’s practice not to bill these items until final shipment/delivery has occurred. However, if

billing is required, several review steps must be accomplished prior to submission to accounts

receivable.

a. Criteria. These contracts are subject to several tests of ownership, inventory management,

and liability recognition which may delay the revenue process. The following criteria are used to

recognize revenue when delivery has not yet occurred.

Note: The term “ownership” is used synonymously with “title.”

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■ Bill and hold in contract negotiations cannot be offered or solicited, but must be requested by

the customer.

■ Terms of performance must be completed and accepted by the buyer before the transaction

can be recognized (no unqualified right of return, refunds, etc.).

■ The product must be complete, ready for shipment, segregated from other inventory, and not

be subject to being used to fill other orders.

■ Time lines for the transfer of liability and ownership must be defined clearly and must pass

completely to the buyer.

■ Credit terms must be in writing and follow normal business practices and cannot include

abnormal or extended credit terms.

■ Complete schedules for delivery of the goods must be negotiated in advance, outlined in the

contract, and not exceed normal industry standards and practice.

b. Pricing. Pricing must be consistent with procedures established in the Program Statement

Pricing Procedures, FPI. However, consideration must be given to variable costs for such

items such as storage costs or costs incurred by FPI for inventory management.

c. Delivery. Delivery schedules must be within normal industry guidelines and be consistent

with the customer’s other trade practices.

d. Ownership Recognition. Revenue recognition cannot be completed until all the rights of

ownership and liability have passed to the buyer. Validation of this transfer must be in writing

and approved by the Controller prior to accounts receivable billing the order.

e. Validation Procedures. The General Manager of each Business Group must designate a

staff member to identify all contracts viewed as Bill and Hold and prepare a written report with

specific deadlines or clauses as outlined above and forwarded for review by a designated

committee (the General Manager, Controller and the Deputy Controller responsible for accounts

receivable, at a minimum).

f. Review. This committee must review the report for specific contract language (ownership,

pricing, credit terms, retention and shipment, etc.) to ensure clarity of elements, reasonableness

of deadlines, and consistency of corporate guidelines.

g. Certifications. Upon the committee’s review and approval, the General Manager must

ensure individual certifications are prepared in memorandum format. The certifications will

contain the following information:

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■ Purchase order/contract number.

■ Sales order number.

■ Buyer’s point of contact by name, address, phone number, and title.

■ The date of the original contract and the date of performance and acceptance by the

customer.

■ Proof of liability and ownership by the buyer.

h. Proof. Proof of ownership and loss/damage liability can be provided in the form of written

acceptance by the buyer, certified copies of an agency’s balance sheet delineating the inventory

in question, or some other form of written notification by an officer of the agency empowered to

make such certifications.

i. Records. Certifications are forwarded to the Controller or designee for approval. If

approved, the revenue recognition proposal will be forwarded to the Deputy Controller

responsible for accounts receivable, or designee for processing.