Principal vs agent · gross vs net

Control of the good or service before transfer determines gross (principal) vs net (agent)

Status

SPEC ONLY

Why this pattern exists

Critical for marketplaces, ad networks, distributors, resellers. Wrong determination misstates revenue significantly.

03 / 07When this applies

1Sale on behalf of another party

2Marketplace / distributor model

3Subcontractor arrangement

04 / 07Authority

Every codification reference below is verified against the FASB Codification structure or Big-4 public guidance. No fabricated cites.

ASC ASC 606-10-55-36 to 55-40

Principal-vs-agent indicators

ASC ASU 2016-08

Control-based test (vs old risks-and-rewards)

05 / 07What the platform does

1Decision tree: 3 indicators per ASC 606-10-55-39
2(i) Primary responsibility for fulfillment, (ii) Inventory risk, (iii) Discretion in pricing
3Principal: gross presentation · Agent: net (commission only)

06 / 07Watchouts

Common mistakes preparers make on this pattern. The platform's confidence routing surfaces these for reviewer ratification before sign-off.

Defaulting to old risks-and-rewards test (now control-based)

Inconsistent treatment across deal types