Agent’s commission when principal fails to perform
Question
We have identified that we act as an agent and our partner acts as a principal. We recognize commission received from the principal as a revenue.
What shall we do when the principal did not perform and did not satisfy its performance obligations to our end customer?
Can we still recognize commission revenue from that transaction?
Answer
It depends on the terms of the agreement/contract between the principal and the agent, because the agent receives revenue from principal, not from the final customer, being the commission earned for the services provided to the principal.
If there are some conditions related to restriction of revenue due to underperformance of the principal, then yes, restrict revenue.
You should basically examine if you are entitled to that revenue even if the principal fails to perform.
Tags In
JOIN OUR FREE NEWSLETTER AND GET
report "Top 7 IFRS Mistakes" + free IFRS mini-course
Please check your inbox to confirm your subscription.
Leave a Reply Cancel reply
Recent Comments
- BiG4 on IAS 23 Borrowing Costs Explained (2025) + Free Checklist & Video
- Mpho on How to present leases under IFRS 16 in the statement of cash flows (IAS 7)
- Silvia on IFRS 18 Explained: Full Guide + Free Video Lectures + Checklist
- Bilawal on IAS 16 PPE Explained (2025): Full PPE Guide + Free Compliance Checklist
- Augustine Fabuinkwi on IFRS 18 Explained: Full Guide + Free Video Lectures + Checklist
Categories
- Accounting Policies and Estimates (14)
- Consolidation and Groups (25)
- Current Assets (21)
- Financial Instruments (56)
- Financial Statements (54)
- Foreign Currency (9)
- IFRS Videos (74)
- Insurance (3)
- Most popular (6)
- Non-current Assets (56)
- Other Topics (15)
- Provisions and Other Liabilities (46)
- Revenue Recognition (27)
- Uncategorized (1)