This free, guided checker walks your finance team through the key decision points for ASC 606 Principal vs. Agent Assessment. Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
The principal vs. agent assessment is made separately for each specified good or service, meaning each distinct good or service (or distinct bundle) to be provided to the customer.
Define the unit of account - the specified good or service - before assessing principal vs. agent (ASC 606-10-55-36).
Official guidance: FASB Accounting Standards Codification
An entity is a principal only if it controls the specified good or service before it is transferred to the customer. Control can take one of the three forms described in ASC 606-10-55-37A.
A significant integration service indicates the entity controls the combined output before transfer (ASC 606-10-55-37A(c)). The entity does not control the specified good or service before transfer and is arranging its provision (ASC 606-10-55-38).
Official guidance: FASB Accounting Standards Codification
This screen isolates the flash-title trap. Obtaining legal title only momentarily, at essentially the same moment it passes to the customer, does not by itself demonstrate that the entity controlled the good before transfer. Look for substantive evidence of control - holding the good in inventory, directing its use, or the ability to redirect it to another customer - and then corroborate with the indicators in ASC 606-10-55-39.
Momentary or flash title alone does not establish control; reassess the other control forms and the indicators before concluding (ASC 606-10-55-37A).
Official guidance: FASB Accounting Standards Codification
Use this screen when what the entity obtains is a right to a service rather than a good. Control of a right exists when the entity can direct the other party to provide the specified service to the customer on the entity's behalf - for example a right to airline seats or hotel rooms the entity can direct or resell. If the entity can only pass the customer through to a service the other party controls, it is arranging the service and is an agent.
The entity does not control the right to the service before it transfers; it is arranging the service and acts as an agent (ASC 606-10-55-38).
Official guidance: FASB Accounting Standards Codification
Primary responsibility for fulfillment and for the acceptability of the specified good or service is a strong corroborating indicator that the entity controls it before transfer.
Primary responsibility for fulfillment corroborates that the entity controls the specified good or service and is a principal (ASC 606-10-55-39(a)).
Official guidance: FASB Accounting Standards Codification
Inventory risk suggests the entity obtained control of the good before a customer committed to buy it, which corroborates a principal conclusion.
Inventory risk corroborates control even where fulfillment responsibility is shared with the other party (ASC 606-10-55-39(b)).
Official guidance: FASB Accounting Standards Codification
Pricing discretion can indicate control, but an agent can also have latitude in setting prices, so this indicator carries less weight on its own.
Pricing discretion alone is not determinative; weigh all evidence of control before concluding (ASC 606-10-55-39(c)). No indicator corroborates control; the entity most likely acts as an agent (ASC 606-10-55-38).
Official guidance: FASB Accounting Standards Codification
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