Deloitte comment letter on tentative agenda decision on principal versus agent software reseller

Published on: 07 Feb, 2022

We have commented on the IFRS In­ter­pre­ta­tions Committee's pub­li­ca­tion in the December 2021 Update of the tentative agenda decision (TAD) not to take onto the Committee’s agenda the request for clar­i­fi­ca­tion on whether, in applying IFRS 15, a reseller of software licenses is a principal or agent.

We agree with the IFRS In­ter­pre­ta­tions Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision; however, we believe that the analysis of the indicators of control in IFRS 15:B37 under the heading ‘Assessing whether the reseller controls the standard software licences before they are transferred to the customer’ may be too definitive in indicating whether the reseller is principal or agent. In addition, If the Committee decides to retain these observations in the agenda decision, we believe it should reconsider the analysis presented in item c. of the analysis of the indicators of control. As part of its observation in this item, the Committee has concluded that the reseller has inventory risk in the event of non-acceptance by the customer. We believe that the inventory risk arises for the reseller at the point that the licence is created and transferred by the manufacturer and remains with the reseller until the customer accepts the inventory. We believe that the wording in this section should be updated accordingly.


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