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ACCA Strategic Professional · Strategic Business Reporting (International) · Revenue

Zeta Travel operates an online platform on which hotels list rooms. Zeta sets no prices, bears no inventory risk and has no obligation to provide the accommodation; it earns a 10% commission on each booking, which is paid by the hotel. A customer books a room priced at $500 by the hotel. Under IFRS 15, how much revenue does Zeta recognise on this booking?

Zeta recognises $50 of revenue. It does not control the hotel room before transfer, sets no price and bears no inventory risk, so it is an agent. An agent reports only its commission, 10% of $500, rather than the gross booking amount.

  1. A$500, because the customer pays Zeta
  2. B$50, because Zeta acts as agentCorrect
  3. C$450, being the amount paid to the hotel
  4. D$0, because the commission is a financial instrument

Explanation

Zeta does not control the room before it is transferred to the customer, so it is an agent. An agent recognises only its fee or commission as revenue, which is 10% x $500 = $50. Recognising $500 gross would treat Zeta as principal, which is wrong without control of the service.

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