FAR Revenue · Updated November 2026
Should Revenue Be Reported Gross or Net?
The central question is whether the entity controls the specified good or service before transfer to the customer.
Principal
The entity controls the specified good or service before transfer, so revenue is generally reported gross.
Agent
The entity arranges for another party to provide the good or service, so revenue is generally the net fee or commission.
Indicators
Relevant facts can include primary responsibility for fulfillment, inventory risk, pricing discretion, and control of the promised service.
Cash collection trap
Collecting the customer's full payment does not automatically make the entity the principal.
The takeaway
Principal controls the promised good or service. Agent arranges for someone else to provide it.
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FAQ
Does collecting full payment automatically make the company principal?
No.
Does an agent recognize zero revenue?
No. It generally recognizes its fee or commission.
Is gross vs net presentation important?
Yes.