Consignment and concession (shop-in-shop) arrangements: principal vs agent

Department stores and malls routinely host concession or shop-in-shop counters where the brand, not the host retailer, owns the inventory and sets the price until sale - yet the host processes the customer payment and reports the transaction. Under IFRS 15, whether the host recognizes the full sale as gross revenue (principal) or only its commission as net revenue (agent) hinges on which party controls the goods immediately before transfer to the end customer, not on who happens to sit at the till. Getting this wrong materially distorts reported revenue (gross sales inflated many-fold versus a small commission line) even though profit is unaffected, which misleads users comparing revenue-based metrics like same-store sales growth or gross margin percentage across retailers. Because concession terms vary counter-by-counter (some fully consigned, others bought outright by the host), a retailer with dozens of concession brands must assess principal-vs-agent indicators separately for each arrangement rather than applying a blanket policy.

Does the host retailer take title to the concession stock, or does the brand partner retain ownership until sale to the end customer? Who sets the retail price, bears inventory/obsolescence risk, and is responsible for handling unsold stock returns? Is the amount retained by the host a fixed commission (pointing to agent) or the full sale price less a payable to the brand recorded gross (pointing to principal)?

1. Identify the specified good or service to be provided to the end customer under each concession arrangement (usually the branded product itself).
2. Determine whether the host obtains control of the good before it transfers to the end customer by assessing indicators: who is primarily responsible for fulfilling the promise (the brand, per the concession agreement); who bears inventory risk before and after the sale (the brand, since unsold stock reverts or is never owned by the host); who has discretion in establishing price (the brand sets retail price, host cannot mark it up or down); and whether the host has credit/inventory risk exposure.
3. If the host never controls the goods (brand owns stock, sets price, host merely facilitates the transaction and earns a fixed commission percentage), classify the host as agent - recognize only the net commission as revenue.
4. If indicators show the host takes title and price-setting discretion (e.g., buys concession stock outright, resells at its own markup, bears obsolescence risk), classify as principal - recognize gross sales as revenue with cost of sales for the goods.
5. Record the amount collected on behalf of the brand but not yet remitted as a payable (liability), not as revenue, when acting as agent.
6. Reassess the classification whenever concession contract terms are renegotiated (e.g., moving from consignment to a buy-sell arrangement), since a change in terms can flip principal/agent conclusion.

As agent, measure revenue at the net amount retained (commission or fee), which may be a fixed percentage of gross sales, a fixed fee per unit, or a tiered rate - measure at the point the brand's performance obligation to the end customer is satisfied (i.e., at the point of sale, since the host's facilitation service is complete at that moment). As principal, measure revenue at the gross transaction price charged to the end customer, with a separate cost of sales entry at the cost the host paid to acquire the concession stock; subsequent measurement of any unsold host-owned concession inventory follows normal inventory rules (lower of cost and net realizable value). The payable to the brand partner (as agent) is measured at the gross proceeds collected less the host's earned commission, and settled per the concession agreement's remittance schedule (e.g., weekly or monthly).

Disclose: the accounting policy for determining principal-versus-agent classification for concession/consignment arrangements, including the key indicators relied upon; disaggregation of revenue distinguishing owned-inventory sales (gross, principal) from concession/commission revenue (net, agent) if material; the amount and nature of amounts payable to brand partners for goods sold on their behalf (within trade/other payables); significant judgments made in concluding principal-vs-agent status where the conclusion is not straightforward; any consignment inventory held on the retailer's premises but not recognized as the retailer's own inventory (off-balance-sheet note disclosure where material, since it is not the host's asset).

• Recognizing gross sales value as revenue for consigned/concession goods simply because the host'
• s till processed the customer payment, ignoring that the brand controls the goods until sale
• failing to record a payable to the brand partner for the gross amount owed, netting it directly against revenue in a way that obscures the true liability
• applying a single blanket principal/agent policy across all concession counters in the store instead of assessing each brand agreement'
• s specific terms
• recognizing the host'
• s commission revenue gross and separately expensing an amount '
• paid to supplier'
• (double counting) instead of the single net commission approach
• omitting consigned inventory entirely from stock records/disclosures when the retailer bears some risk (e.g., damage while on its premises) that may indicate a different conclusion is needed
• treating VAT/output tax collected on behalf of the brand as part of the host'
• s own revenue.