Decisions reached by the Boards in May and June 2015 with respect to principal versus agent considerations:
Principle for Determining Whether an Entity’s Promise Is to Provide or to Arrange - The Boards reaffirmed the principle in Topic 606 that an entity’s promise is to provide a specified good or service to a customer (that is, the entity is a principal) when it controls the specified good or service before that good or service is transferred to the customer. In contrast, the entity’s promise is to arrange for another party to provide that good or service (that is, the entity is an agent) when it does not control the specified good or service before it is transferred to the customer.
Unit of Account for the Principal versus Agent Evaluation - The Boards decided to amend the guidance on principal versus agent considerations to clarify that a specified good or service is a distinct good or service (or distinct bundle of goods or services).
Application of the Control Principle - The Boards decided to amend the guidance on principal versus agent considerations to clarify the application of the control principle in the context of services.
Control Indicators- The Boards decided will clarify the role of the indicators in paragraph 606-10-55-39 of Topic 606 and paragraph B37 of IFRS 15.
Illustrative Examples - The Boards decided to amend the principal versus agent examples in Topic 606 and IFRS 15, and to include some additional examples, to clarify the application of the principal versus agent guidance.
Estimating Gross Revenue as a Principal - The FASB discussed contracts in which the entity is a principal but is unaware of the price paid for its goods or services by the end customer to an intermediary (or agent). The FASB considered whether the entity should estimate the price paid by the end customer to the intermediary in determining the transaction price. No tentative decisions were reached. The Board instructed the staff to perform some additional analysis.
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