Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS 15 – Principal and Agent
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- August 10, 2018 at 5:59 am #467147
Entity A enters into a management agreement with Customer B to provide lawn maintenance services, including fertilization, mowing and trimming, and periodic seeding. Entity A does not provide lawn maintenance services itself; rather, it contracts with third-party service providers for each aspect of the lawn maintenance service. Entity A and Customer B have agreed on a single price for the lawn maintenance service.
Entity A separately enters into contracts with third-party service providers and directs those service providers to perform each aspect of the lawn maintenance services. Once A enters into contracts with the third-party service providers, it can direct those service providers to perform services for any number of its customers.
Even though A is not performing the services, it controls the right to the services by directing specific lawn maintenance service providers to perform each aspect of the lawn maintenance services. Because A controls the right to the services, A concludes that it is acting as the principal.From the above illustration, does it mean that third party service providers are acting as agents??
August 15, 2018 at 1:07 pm #467984Hi,
Again, this is not likely to be seen in FR, but use the pointers that I gave in the previous post to help you identify the principal/agent.
Thanks
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