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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS 15 – Principal and Agent
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??
Hi,
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
