Measuring the Revenue in an Agency Relationship

Abstract

Today, the corporate sector is well established in producing and delivering different types of products and services in each industry. Nowadays, entities highly engage into agency transactions related to revenue. Realistically, it is very challenging concept to determine when and whether to recognize the revenue in the financial statements or not. SB Limited is a prominent building construction company in Sri Lanka. It is engaged with contractual agreements with customers as well as with subcontractors. As to the customers’ requirements, SB Limited designs the building and the interior settings. During the process of construction, SB Limited hires DP Limited to fabricate the interior settings for the designed building by engaging into the legal contract called as “Letter of Award” which demonstrates that “DP Limited satisfies the finishing performance obligation of the project on behalf of SB Limited by receiving a fixed rate of commission on the total contract value.”