Agent’s commission when principal fails to perform
We have identified that we act as an agent and our partner acts as a principal. We recognize commission received from the principal as a revenue.
What shall we do when the principal did not perform and did not satisfy its performance obligations to our end customer?
Can we still recognize commission revenue from that transaction?
It depends on the terms of the agreement/contract between the principal and the agent, because the agent receives revenue from principal, not from the final customer, being the commission earned for the services provided to the principal.
If there are some conditions related to restriction of revenue due to underperformance of the principal, then yes, restrict revenue.
You should basically examine if you are entitled to that revenue even if the principal fails to perform.
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