Revenue – ifrs 15 handbook

Example 8 – Entity is an agent when goods and services delivered 
directly to customer by third parties
Company X markets itself as a leading provider of end-to-end IT security 
solutions. X aims to operate as a specialist extension of its customers by having 
its experts match the customers’ needs to available solutions. 
X helps a customer evaluate available technologies and determine which 
combination of technology solutions will best meet its specific needs. This 
assistance generally leads to the purchase of an enterprise-wide solution by the 
customer. The products typically consist of hardware and software licences, as 
well as related support, maintenance and training. 
X has concluded that each hardware product and each software licence is 
typically a specified good. 
Hardware
X does not maintain an inventory of hardware; all hardware purchased by X’s 
customers is delivered directly to the customer by one of X’s vendor partners. 
X’s terms with its vendor partners typically mirror its terms with its customers. 
For example, title typically transfers to X at the same time as it transfers to 
the customer (typically, at the vendor partner’s location), and return rights 
from the customer to X are typically mirrored by the return terms from X to its 
vendor partner.
In addition to the above terms, X considers the following facts when 
determining whether it is a principal or agent in the arrangement. 
– X sets the price of the hardware to the customer, but its discretion to set 
that price is effectively constrained by market pressures – i.e. it cannot price 
goods too expensively because X’s customers generally have alternative 
supply options. 
– Any vendor warranties and end-user agreements or documentation are 
between the third party vendor and the customer – X is not a party thereto. 
Therefore, the third party vendors are clearly not invisible to the customer. 
– X frequently serves as a contact point for its customers, but does not 
maintain a call centre or helpdesk. When customers contact it, X generally 
just facilitates the customer’s contact with the appropriate personnel from 
the third party vendor. 
– X generally does not accept returns from customers that will not be accepted 
by the third party vendor.
X concludes that it is an agent for sales of hardware. Important to X’s conclusion 
is that at no point before control is transferred to the customer can X direct a 
specified unit of hardware to anyone or prevent the third party vendor from 
directing (e.g. selling, giving or leasing) it to any other customer the vendor 
chooses. X has no rights to any hardware units before a customer places 
an order with X and X, in turn, places an order with the third party vendor. In 
addition, X does not maintain any hardware inventory of its own, has no pre-
customer order purchase commitments with the third party vendors and does 
not have any arrangements with its vendor partners for them to hold units for X.

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10 Other application issues | 255
10.3 Principal vs agent considerations
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Moreover, X concludes that its vendor partners do not perform on X’s behalf in 
these arrangements. Although X establishes the price of the hardware with its 
customers, the weight of relevant evidence supports a conclusion that the third