The registrant argued that no single indicator was indicative of control in ASC 606, and concluded that it should report revenue as an agent (e.g., net instead of gross). Lack of inventory risk and receipt of only a commission were seen as indicators that control had not passed to the registrant. The registrant also noted that upon receipt of payment from the end customer, it remitted the payment to the related party facility, but kept a fixed percentage as a commission. However, the registrant claimed that an insurance policy alleviated any inventory risk. The registrant could also direct the product to any of its customers, a further indicator that control of the product was transferred to the registrant before the customer. The registrant had a contractual right to market and sell 100 percent of the commodity produced by the related party and took possession and legal title to the product before transporting it to the customer, both indicators that the registrant had control of the product. In this situation, the registrant sourced its product from multiple facilities, including a related party.
Jillian Pearce spoke about a principal-agent fact pattern faced by a commodity producer and reseller.
#2021 aicpa sec conference professional
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