What is Retention Receivable?
Retention receivable is the portion of a contractor’s billings that the customer has withheld and that will be released after specific completion or defect liability conditions are met. It is recognized as a receivable by the contractor and split between current and non-current portions.
How It Works
- Recognize retention as part of revenue when earned, even if cash is delayed.
- Classify the receivable based on expected release date.
- Reassess collectability and recognize expected credit losses if needed.
- Disclose retention separately from other trade receivables when material.
Saudi Context
Saudi contractors working on Vision 2030 mega-projects often carry sizable retention receivables on their balance sheets, sometimes spanning two or three years from initial billing.
Example
A contractor bills SAR 5 million on a project with 10 percent retention. SAR 500,000 is recorded as retention receivable, expected to be collected after one year.