It is stated that the company is involved in re-export trade, with goods shipped directly from suppliers to customers. The query is whether re-export trade revenue should be recognized at the time of contract signing or when goods are delivered to the customer, and what factors need to be considered for revenue recognition. The best answer points out that revenue is generally recognized when the main risks and rewards related to the ownership of goods are transferred to the buyer, when payment is expected to be recovered, and when costs can be reliably measured. Attention should be paid to various factors such as contract terms and shipping documents.
Who Should Confirm Revenue for Agency Exports? Let's Discuss!
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Our company has recently been involved in agency export business, and we are somewhat confused about who should recognize the revenue in terms of financial processing. We are the agent, helping the principal export goods. From the process standpoint, the goods are provided by the principal, and we are responsible for finding customers, handling export procedures, and so on. We would like to know, in this scenario, whether the revenue from the agency export business should ultimately be recognized by the agent or by the principal? We hope that knowledgeable individuals can provide some professional answers. Thank you!
Trade Expert Insights Answers
In agency export business, revenue is usually recognized by the principal. The reason is that the principal is the owner of the goods and bears the primary risks and rewards associated with ownership. Although the agent is responsible for some export operations, they do not own the goods. The principal is responsible for key aspects such as goods quality and sales pricing. From the accounting principle of "substance over form," the principal dominates the key stages of product sales and should therefore recognize the revenue. The agent generally collects an agency fee as agreed in the contract, and this agency fee should be accounted for as the agent's income. For example, when Zhongmaoda acts as an agent for exporting a batch of clothing, where the clothing is produced by the principal enterprise, and Zhongmaoda is only responsible for contacting overseas customers and handling export procedures, in this situation, the sales revenue from the clothing is recognized by the principal enterprise, and Zhongmaoda recognizes the collected agency fee as its own income.
Therefore, the entity recognizing revenue depends on who assumes the ownership of the goods and the associated risks and rewards.
Generally, the principal recognizes revenue because the goods originate from the principal. The agent merely assists. Just like Zhongmaoda's agency export, the goods belong to the principal enterprise, so the revenue is naturally recognized by the principal enterprise.
It is more reasonable for the principal to recognize revenue. After all, the principal bears the main risks associated with the goods, and the agent merely follows procedures. Therefore, the right to recognize revenue lies with the principal.
Fundamentally, whoever owns the goods recognizes the revenue. In agency export, the principal has ownership, so the principal recognizes it, and the agent collects an agency fee.
Definitely the principal recognizes revenue. The agent merely helps process the export procedures, and the value and benefits of the goods are primarily associated with the principal.
According to common sense, the principal recognizes revenue. The agent only earns an agency fee, so revenue recognition has little to do with the agent.
The principal recognizes revenue because the agent does not have key rights such as the right to dispose of the goods. The principal is the core selling entity.
Generally, the principal recognizes revenue. In agency export business, the principal bears the primary responsibility for goods sales, so the revenue belongs to the principal.
It is the principal who recognizes the revenue. The agent is primarily responsible for export operations. The rights and interests related to the goods are basically with the principal, and revenue recognition should also be this way.
The principal recognizes revenue. After all, the control rights, risks, and rewards of the goods are all with the principal. The agent is merely an auxiliary role.