Pick any class of upper-level accounting students, and give them a few cases of supplier/customer relationships for which “gross versus net presentation” of revenues is an issue, and I’ll wager that the class will come to a consensus on the presentation most consistent with the objectives of financial accounting 90% of the time.
Yet, somehow, this issue has become the first battleground over the new joint revenue recognition standard with the IASB.
How Did This Get So Hard?
The question is nothing more than this: if two parties are involved in selling goods and services to a customer, how should each of the parties involved in the sale present their revenues? Not all of the fact patterns are basic, but let’s start with one that is:
Facts—An online retailer receives an order from a customer. The customer uses a credit card to pay the retailer $100. The retailer notifies its supplier, who ships the merchandise [Read More...]