Principal vs agent in payment flows

A payment or marketplace platform that only facilitates a transfer of funds between payer and payee is typically an agent and should recognize only its fee as revenue, not the gross transaction value; getting this wrong materially overstates revenue, distorts take-rate and margin metrics used by investors and lenders, and can misstate VAT/withholding exposure calculated off the wrong revenue base.

Does the platform ever take control of the merchant's goods/services or the right to receive payment before it passes to the end customer? Does it bear inventory, credit, refund, or delivery risk on the transaction? Is its fee a fixed/percentage rate regardless of transaction value, or does it set the price charged to the payer?

1) Map each product flow end-to-end (payer to payee) and identify every party involved (platform, merchant, scheme, bank). 2) Test control: does the entity obtain control of the good/service (or the right to the payment) before it transfers to the end customer, even momentarily? 3) Apply the indicators holistically: primary responsibility for fulfillment, inventory risk, pricing discretion, credit risk exposure, no single indicator is determinative. 4) Conclude principal (control) or agent (no control) per product line, not for the entity as a whole. 5) If principal, recognize gross transaction value as revenue and the related cost as an expense; if agent, recognize only the net fee/commission. 6) Document the conclusion and revisit it whenever contract terms, risk allocation, or the value chain change.

Assess indicators of control (primary responsibility for fulfillment, inventory risk, pricing discretion, exposure to credit/delivery risk) holistically rather than relying on a single factor such as who legally holds the funds; measure gross revenue at the transaction price charged to the payer (principal) or at the net fee retained (agent); reassess the conclusion if commercial terms with merchants or schemes change materially.

Disclose: the principal/agent judgment reached and its basis; the revenue impact of the conclusion where material; gross transaction/processing volume as a separate operating metric (clearly labelled as non-IFRS) alongside IFRS revenue; the accounting policy applied consistently across similar products; any change in conclusion period-over-period and its effect.

• Recognizing gross payment volume as revenue merely because funds pass through the platform'
• s bank account
• assuming agent status solely because the entity is a licensed payment institution (or principal status solely because it is unlicensed)
• applying one conclusion to all products without assessing each revenue stream separately
• failing to re-test the conclusion when a marketplace begins offering its own guarantees, insurance, or buyer protection that increases its risk exposure
• not aligning the gross/net presentation with how management actually discusses the business with investors.