Revenue recongnition

Revenue recongnition

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Picture this:

You sell to the US market through an agent, the agreement states the inventory resides with the agent as trustee, the agent faciliates the sale (including invoicing) and must transfer the cash when received.  The agent is not liable for any problems with the products.  The agent receives a commission based on his costs (sales and marketing admin).

The UK entity records the sales as they arise to the end customer in the US, and the inventory transfered to the US is recorded on its balance sheet.

Would the US entity under IFRS or US Gaap be entitled to also show the product sales as revenue?

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By Michael Beaver
05th Jun 2014 12:55

Is the agent also in charge of collecting monies from the end client and remitting them to the UK?

If so, my understanding is that the agent can have a choice of reporting gross sales as revenue, payments from the UK company as revenue, and payments to the UK company as cost of sales.  Or they can just report the commission from the UK company as revenue.  Either way the net revenue is the same.

 

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