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Principal or agent? Gross or net? Your revenue questions answered

08/25/20

Hear PwC discuss frequently asked questions when it comes to the gross vs. net presentation of revenue.

Revenue is an important financial metric. So because the gross vs. net determination can have a large impact on the top line, companies need to get that decision right. In this episode, Heather Horn is joined by PwC partner Angela Fergason to discuss the accounting factors for gross vs. net revenue presentation.

Topics include:

0:35 - Overview. Why does the guidance for gross vs. net revenue generate so many questions? Angela kicks off with the history of the guidance and shares the emerging business models that have caused more focus on this area.
5:43 - Steps in the model. Angela and Heather discuss the two-step model and demonstrate its application by applying it to an example.
9:45 - Control indicators. The determination starts with whether a company controls the specified good or service. Angela discusses the three indicators of control transfer, and how they may apply to a supplier arrangement.
14:58 - Challenging fact patterns. The assessment is harder to navigate when the arrangement doesn’t involve a tangible good. Angela discusses the considerations for when the end customer is receiving a service.
19:40 - Key reminders. We close by highlighting the importance of disclosures and carefully reading all of the contracts.

View full podcast series

About our guest

Angela Fergason is a partner in PwC's National Office with over 20 years of experience who specializes in accounting for revenue and employee compensation arrangements. She is a frequent speaker on accounting and financial reporting topics and is a contributor to many PwC National Office publications, including our accounting guides on revenue and stock-based compensation.

About our host

Heather Horn is PwC's National office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 25 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.