In deciding whether MVS needs to report the sale of other retailers' gift cards as revenue (gross) by the principal or as commission (net) by the agent, it should be noted that other retailers are the primary obligors responsible for fulfillment of the service. FASB ASC paragraph 605-45-45-16 states that if a supplier is responsible for fulfillment, an entity does not have risks and rewards as principal and that it should record revenue net based on the amount retained (FASB 2009f). MVS is acting purely as a commission agent on behalf of other retailers. FASB ASC paragraph 605-45-45-17 states that if an entity earns a stated percentage of the amount billed to a customer, that fact may indicate that the entity is an agent of the supplier and should report income only for the net amount retained (FASB 2009f). MVS has correctly recorded a similar arrangement—sale...

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