IAS 18 — Guidance on identifying agency relationships

Date recorded:


The IFRIC received a request for an interpretation of how IAS 18 Revenue paragraph 8 should be applied to situations in which an entity employs another entity to meet the requirements of a customer under a sales contract. The request questioned whether there is a need for more general interpretative guidance in this area.


Decision not to add

September 2007



The IFRIC noted that IAS 18 specifies the accounting for agency relationships. Paragraph 8 states that ‘in an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.’ Paragraphs 6 and 18(d) of the Appendix to IAS 18 refer to the substance of the transaction to identify whether the entity is acting as agent or principal.

The IFRIC acknowledged that no detailed guidance was given in IFRSs on identifying agency relationships. However, the IFRIC believed that:

  • determining whether an entity is acting as a principal or as an agent depends on facts and circumstances and that judgement is required
  • any guidance beyond that given in IAS 18 would be more in the nature of implementation guidance than an Interpretation.

For these reasons the IFRIC decided not to develop an Interpretation and to remove this item from its agenda. The IFRIC also decided to recommend to the Board that guidance be included in the Appendix to IAS 18 to help constituents to determine whether an entity is acting as a principal or as an agent.


IFRIC reference: IAS 18-2

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.