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When should commission income be recognised?

When should commission income be recognised?

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We have a client who sells financial products on a commission basis, apparently a mortgage would be agreed and the details handed over to the mortgage company, the resulting commision is then paid down to the broker network who takes a portion in fees, it is then paid onto the firm our client contracts to who also take a cut, finally our client receives the remainder.  I am led to believe that the time from submitting the paperwork to receiving the commision is usually 6 weeks, in between these dates the mortgage could fail and there would be no income.

Any thoughts.

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By johngroganjga
28th May 2019 19:41

I would say that your client should recognise its share of the income as soon as it knows the mortgage company has parted with the funds (i.e. the commission, not the mortgage). Depending on how much transparency there is in the arrangements, that may be the same time as it receives its share.

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