Question Tag: Agent

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 1 Marks

BL – May 2015 – L1 – SA – Q15 – Agency Law

Identify the parties involved in an agency relationship.

An agency relationship involves the
A. Agent alone
B. Principal alone
C. Third party alone
D. Agent, principal, and the third party
E. Third party and the principal

Answer: D

Explanation:
The correct answer is “D. Agent, principal, and the third party.” An agency relationship is typically a triangular relationship involving an agent, a principal who grants authority, and a third party with whom the agent interacts on behalf of the principal.
  • 3 Marks

PT – Nov 2020 – L2 – Q2d – Value-Added Tax (VAT), Customs, and Excise Duties

Identify the taxable person when goods are sold by an agent or auctioneer.

An agent sold goods on behalf of a Principal. Who is the taxable person here? If the agent was rather an auctioneer, who would have been the taxable person? (3 marks)

A supply of goods or services made by a person as an agent for another person who is the principal is a supply by the principal. The principal is the taxable person in this case. However, if the agent is an auctioneer, the supply of goods by auction is treated as a supply by the auctioneer for consideration in the course or furtherance of a taxable activity carried on by the auctioneer, making the auctioneer the taxable person.

  • 5 Marks

CR – Mar 2024 – L3 – Q2c – IFRS 15: Revenue from Contracts with Customers

This question requires determining whether Odjani Plc should recognize revenue as a principal or agent in the sale of airline tickets, based on IFRS 15.

Odjani Plc (Odjani) negotiates with major local and international airlines to purchase tickets at reduced rates compared with the price of tickets sold directly by the airlines to the public. Odjani agrees to buy a specific number of tickets and must pay for those tickets regardless of whether it is able to resell them. The reduced rate paid by Odjani for each ticket purchased is negotiated and agreed in advance. Odjani determines the prices at which the airline tickets will be sold to its customers. Odjani sells the tickets and collects the consideration from customers when the tickets are purchased. The entity also assists the customers in resolving complaints with the service provided by the airlines. However, each airline is responsible for fulfilling obligations associated with the ticket, including remedies to a customer for dissatisfaction with the service.

Required:
In line with IFRS 15: Revenue from Contracts with Customers, explain whether Odjani is a principal or agent and indicate how it would determine the amount of revenue to recognize from the ticket sales.

Under IFRS 15, the determination of whether an entity is acting as a principal or an agent is based on who controls the goods or services before they are transferred to the customer.

  1. Principal vs Agent Assessment:
    • Principal: An entity is a principal if it controls the goods or services before they are transferred to the customer. As a principal, Odjani would recognize revenue at the gross amount received from the customer.
    • Agent: An entity is an agent if it arranges for another party to provide the goods or services to the customer. The agent would recognize revenue as the net amount (i.e., the difference between what it receives from the customer and what it pays to the supplier).
  2. Odjani’s Role:
    • Odjani negotiates and purchases tickets in advance and assumes the risk of payment whether or not the tickets are resold. This indicates that Odjani controls the tickets before transferring them to customers.
    • Additionally, Odjani has the discretion to set the selling price for the tickets, which further suggests that Odjani is acting as the principal in the arrangement.
    • Although the airline fulfills the service obligations (i.e., providing the flight), Odjani’s control over the tickets and pricing means it is acting as a principal.
  3. Revenue Recognition:
    • Since Odjani is acting as a principal, it should recognize the gross amount received from customers as revenue.
    • The costs associated with purchasing the tickets from the airlines would be recognized as expenses, separate from the revenue recognized.

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope