For example, when a travel agent sells an airline ticket to a tourist, will it always act as an agent in IFRS 15 meaning because the service (the flight) will be provided by an airline? The answer is no. agent considerations relate to services when the entity will not itself provide a final service. agent considerations in relation to services Paragraph IFRS 15.B35A provides additional guidance to be applied in situations when another party is involved in providing goods or services to a customer.
It was concluded by the IASB that it is mostly irrelevant as agents are often exposed to credit risk as well as principals. It is worth noting that exposure to credit risk is not listed above as a factor to be considered. discretion in establishing the price for the specified good or service.primary responsibility for the good or service meeting customer specifications.Paragraph IFRS 15.B37 provides helpful examples in assessing whether a reporting entity controls a good or service before it is transferred to the customer: Conversely, an agent only arranges for the provision of goods or services by another party without taking control over those goods or services before they are transferred to a customer. Step no.1 is especially important in relation to services and intangible assets.Īs mentioned earlier, principal is a party that controls a good or service before it is transferred to a customer. assess whether the reporting entity controls identified good or service before that good or service is transferred to the customer.identify the specified goods or services to be provided to the customer.Paragraph IFRS 15.B34A provides an important two-step framework in making such an assessment: Paragraph IFRS 15.B34 requires entities to assess whether they act as a principal or an agent for each good and service provided to a customer. Agent – the party that arranges for the goods or services to be provided by another party without taking control over those goods or services.Principal – the party that controls the goods or services before they are transferred to customers,.
A principal recognises revenue and expenses in gross amounts, whereas an agent recognises only fees or commissions, even if gross cash flows go through the agent (IFRS 15.B35-B36). agent considerations are otherwise known as gross vs.
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