Agent and distributor network commissions

Commissions paid to onboard merchants or run cash agent networks are incremental costs of obtaining a contract that must be capitalized and amortized over the expected customer relationship if recovery is expected, rather than expensed immediately, when they meet the IFRS 15 cost-capitalization criteria; expensing them all upfront front-loads costs and can materially depress reported profitability during a high-growth merchant-acquisition phase, misleading readers about underlying unit economics.

Would the commission have been incurred regardless of whether this specific merchant/agent contract was obtained (a base salary), or is it a true success-based amount? If incremental and the amortization period exceeds one year, what expected relationship duration (informed by actual churn data) is used for amortization? Is the practical expedient for periods of one year or less applied consistently across similar commission structures?

1) Test incrementality: would the commission have been incurred regardless of whether this specific contract was obtained? If yes (e.g., a base salary), expense it; if no (a true success-based commission), proceed to step 2. 2) Check the practical expedient: if the amortization period would be one year or less, expense immediately as a policy choice. 3) If the expedient does not apply, capitalize the commission as a contract cost asset. 4) Estimate the amortization period using the expected merchant/agent relationship duration (informed by actual churn data), not just the initial contract term. 5) Amortize on a systematic basis consistent with the transfer of the related services (typically straight-line over the expected relationship). 6) Reassess the asset for impairment if expected future consideration from the merchant falls below the asset's carrying amount, and update the amortization period if churn patterns change materially.

Amortize capitalized commissions on a systematic basis consistent with the transfer of the related goods or services, typically over the expected merchant lifetime, updating estimates if churn patterns change; measure the capitalized asset at the commission amount actually paid or payable (not a grossed-up or estimated amount); apply the one-year practical expedient consistently across similar commission structures, not selectively.

Disclose: the policy for capitalizing contract costs and applying the practical expedient; the amortization method and period(s) used; the closing balance of capitalized commission assets; amounts amortized and any impairment losses recognized during the period; and the judgment applied in estimating expected customer life.

• Expensing all agent commissions immediately without assessing the practical expedient or capitalization criteria
• capitalizing commissions that are contingent on ongoing merchant activity and therefore not truly incremental costs of obtaining the original contract
• using the initial contract term instead of a realistic expected relationship length informed by renewal/churn data
• failing to impair the capitalized asset when a merchant is known to be closing or churning early.