"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. the entity is a principal)
or to arrange for those goods or services to be provided by the
other party (i.e. the entity is an agent)..." —IFRS
15.B34
At 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.
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 determination requires a lot of
judgement and detailed analysis of the specific facts and
circumstances of the transaction concerned. In this article, I will
try to provide some guidance on what to consider when doing the
assessment.
