It may seem like this analysis isn’t required if-in the end-the result is the same. However, there is no effect on the profit and loss. If you are the agent, you are required to show only the commission you are entitled to receive, meaning you must account for the net total of revenues received. If you are the principal of the transaction, you must account for the gross total of revenues received and transfer the commission to the agent afterwards. Why does it even matter?Ĭertainly, the most significant difference to consider is the presentation of the revenues received from the customer. In this article, I will try to provide some guidance on what to consider when doing the assessment. The determination requires a lot of judgement and detailed analysis of the specific facts and circumstances of the transaction concerned. However, if you have already come across this topic, you may have experienced that the “principal or agent?” question is not easy to answer. the entity is an agent)…” -IFRS 15.B34Īt first sight, it seems more or less straightforward to determine if an entity is a principal or an agent in a transaction where another party is involved.

the entity is a principal) or to arrange for those goods or services to be provided by the other party (i.e.

“When another party is involved in providing goods or services to a customer, the entity shall determine whether the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e.

Pizzicato counterpart