Revenue – ifrs 15 handbook

10.3.3 Recognition
IFRS 15.B35B
If the entity is a principal, then it recognises revenue and the related costs on a 
gross basis – corresponding to the consideration to which the entity expects to 
be entitled.
IFRS 15.B36
If the entity acts as an agent, then its performance obligation is to arrange for the 
provision of the specified goods or service. Therefore, it recognises revenue on a 
net basis corresponding to any fee or commission to which the entity expects to 
be entitled. An entity recognises revenue when its obligation to arrange for the 
provision of the specified good or service is fulfilled, which may be before it is 
provided to the customer by the principal.
IFRS 15.47, B35B–B36
Amounts collected by an agent on behalf of a third party are accounted for as a 
payable in the statement of financial position until they are settled and do not gross 
up revenue and expenses. Similarly, amounts prepaid by an agent to a third party on 
behalf of customers are recognised as a receivable until they are recovered and do 
not gross up revenues and expenses. For discussion of sales taxes, see 
Chapter 3
.
Example 12 – Revenue recognition by a principal
Company S is providing restructuring advice to Customer C and has determined 
that it is acting as principal in providing the service to C. 
S billed C 100 for the services performed and incurred costs of 50 to deliver the 
service, which included costs of 30 paid to external lawyers. 
Because S is acting as a principal, it reports revenue and costs, including the 
legal fees paid to the external lawyers, on a gross basis. As such, it recognises 
revenue of 100 and costs of 50.
Example 13 – Revenue recognition by an agent
Company V operates a website from which it sells Company T’s products. 
Customers place orders directly on the website and provide credit card details 
for payment. V receives the order and authorisation from the credit card 
company and passes the order on to T, which ships the product directly to the 
customer. V does not take title to the product and has no risk of loss or other 
responsibility for the function or delivery of the product. T is responsible for all 
product returns and defects. T sets the price of the product at 175, from which V 
receives a commission of 25.
V considers that it does not take title to the product, is not primarily responsible 
for providing the product, does not have inventory risk and does not have 
discretion in establishing prices. Therefore, V determines that it does not control 
the product before it is transferred to the customer and acts as an agent. As a 
result, V recognises its fee of 25 as revenue when it passes the order to T.

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260 | Revenue – IFRS 15 handbook