A firm of project managers procures materials from another entity for the customer. The firm of project managers will receive a commission for the procurement. If the firm is unable to procure the materials for the customer, the customer has the right to source the materials from a different party.
Required: How is the firm of project managers acting in this contract? Based on IFRS 15, how should revenue be recognised?
See the suggested answers to practice activity 13.18 here.
Suggested answers to practice activity 13.18
The firm of project managers is acting as an agent in the contract with the customer. Revenue should be recognised as the net amount the entity is entitled to retain in return for its services as the agent. The commission of the firm of project managers is the net amount of consideration that the entity retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party.
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