Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of Tenaris’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group.
Tenaris’s products and services are sold based upon purchase orders, contracts or upon other persuasive evidence of an arrangement with customers, including that the sales price is known or determinable. Sales are recognized as revenue upon delivery, when neither continuing managerial involvement nor effective control over the products is retained by Tenaris and when collection is reasonably assured. Delivery is defined by the transfer of risk and
may
include delivery to a storage facility located at
one
of the Company’s subsidiaries. For bill and hold transactions revenue is recognized only to the extent (a) it is highly probable delivery will be made; (b) the products have been specifically identified and are ready for delivery; (c) the sales contract specifically acknowledges the deferred delivery instructions; (d) the usual payment terms apply.
The percentage of total sales that were generated from bill and hold arrangements for products located in Tenaris’s storage facilities that have
not
been shipped to customers amounted to
3.3%,
2.8%
and
3.0%
as of
December 31, 2017,
2016
and
2015,
respectively. The Company has
not
experienced any material claims requesting the cancellation of bill and hold transactions.
Other revenues earned by Tenaris are recognized on the following basis:
| § | Construction contracts (mainly applicable to Tenaris Brazilian subsidiaries and amounted to $11 million, 0.21% of total sales). The revenue recognition of the contracts follows the IAS 11 ”Construction Contracts" guidance, that means, when the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognized over the period of the contract by reference to the stage of completion (measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract). |
| § | Interest income: on the effective yield basis. |
| § | Dividend income from investments in other companies: when Tenaris’s right to receive payment is established. |
