Gross versus net revenue: Is your company the principal or agent?

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This episode begins a podcast miniseries on revenue topics with a discussion of principal versus agent (PvA) or “gross versus net” revenue. In other words, the principal in a transaction records revenue on a gross basis and the agent records revenue net. The PvA analysis can be subjective but it's important to get it right as it can materially impact a key line item in the income statement, revenue from contracts with customers.

In this episode, we discuss:

• 2:00 – An overview of the PvA model and reporting impacts
• 8:45 – Key considerations in the PvA analysis
• 9:50 – Assessing control
• 16:25 – Challenges in applying the PvA analysis to specific arrangements, including:
  • 16:59 – Healthcare services
  • 24:15 – Payment processing
• 30:12 – Additional reminders relating to the PvA analysis and related disclosures

For more information, read chapter 10 of our Revenue guide. Additionally, follow this podcast on your favorite podcast app for more episodes.

Mike Coleman is a partner in PwC's National Office with over 30 years of experience. Mike specializes in accounting for revenue and software arrangements and has served technology clients for much of his career. In addition, Mike has represented the firm on the AICPA Software Task Force.

Pat Durbin is a Deputy Chief Accountant in PwC’s National Office. He has over 30 years of experience consulting with our clients and engagement teams on complex accounting matters, including issues related to revenue, compensation, income taxes, and inventory under both US GAAP and IFRS.

Heather Horn is the PwC National Office Sustainability & Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series.

Transcripts available upon request for individuals who may need a disability-related accommodation. Please send requests to us_podcast@pwc.com.