| Course | ACC 610 Financial Reporting I |
|---|---|
| Module | Module 2 |
| Paper type | graduate Codification research memo on principal versus agent |
| Length | About 1,080 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 610 Module 2
Research Memo: Gross or Net Reporting of App-Booked Spraying Services
[Student Name]
Southern New Hampshire University
ACC 610: Financial Reporting I
Module Two Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Research Memo: Gross or Net Reporting of App-Booked Spraying Services
Issue
Should the company report revenue from spraying services booked through its app gross, at the $14 per acre the farmer pays, or net, at the $3.50 per acre it retains after paying the pilot?
Facts
The company launched its spraying service last year. Farmers request spraying through the company's app and accept the company's terms of service, which promise application of the farmer's chosen product at the specified rate to the mapped field within a stated window. The company sets the price, $14 per acre, and may change it by region and season. It contracts with independent pilots, who hold the required state applicator licenses and FAA certifications and operate their own drones, but who must use the company's flight-planning software and follow its application specifications. The company assigns jobs to pilots, pays them $10.50 per acre within 30 days whether or not the farmer has paid, and collects from the farmer. If the company's coverage check shows a missed strip, the company sends a pilot to re-fly at its own cost. Farmers complain to the company, not to pilots, and the company has issued credits for poor application.
Authoritative Guidance
ASC 606-10-55-36 requires an entity to determine whether it is a principal or an agent for each specified good or service promised to a customer. Under ASC 606-10-55-36A and 55-37, the company acts as principal when it has control of the specified good or service ahead of its transfer to the customer. For services provided by another party, the entity controls the service if it has the right to direct the other party to provide the service on its behalf (ASC 606-10-55-37A). ASC 606-10-55-39 lists indicators that an entity controls the specified good or service: it is primarily responsible for fulfilling the promise, it has inventory risk and it has discretion in establishing the price. If the entity is a principal, it recognizes revenue in the gross amount; if an agent, in the amount of its fee or commission (ASC 606-10-55-37 and 55-38) (Financial Accounting Standards Board, 2014).
Analysis
Step one is identifying the specified service. The company's terms promise application of product to the farmer's field, not merely an introduction to a pilot. The farmer contracts with the company, specifies the field and rate in the company's app and receives the company's coverage report. The specified service is spraying.
Step two is whether the company controls that service before it is provided. The company directs pilots: it assigns jobs, requires its flight-planning software and specifications and decides whether work meets its standard. That is the right to direct another party to provide the service on its behalf, which ASC 606-10-55-37A describes as control.
The indicators support this conclusion. The company is primarily responsible for fulfillment: farmers look to it, it handles complaints and it re-flies missed areas at its own cost. Inventory risk, applied to services, is the risk of having committed to pay for capacity before having a customer for it; the company pays pilots whether or not farmers pay, which is a related exposure. And the company has full discretion over price. Kieso et al. (2019) point out that the indicators serve only as support for a control judgment and are never tallied, and here they all point the same way.
Alternative View
An alternative view is that the company operates a marketplace that matches farmers with independent pilots, who own the drones and hold the licenses, so it is an agent earning a $3.50 commission. The pilots' independence and licenses are real and are why the company cannot fly the jobs itself. But ASC 606 focuses on whether the company controls the service promised to the farmer, not on who physically performs it. Because the company promises the outcome, directs the pilots and bears the consequences of poor performance, the marketplace view does not fit. If the facts were different, for example if farmers chose their own pilot, the pilot set the price and the company did not guarantee coverage, the conclusion would likely be agent.
Measurement and Presentation
Last season the app booked 212,000 acres. Reported gross, spraying revenue is $2,968,000 and cost of services is $2,226,000, leaving gross profit of $742,000. Reported net, revenue would be $742,000 with no related cost of services. Gross profit is the same either way, but the gross presentation adds about $2.2 million to revenue, which matters because the company's investors track revenue growth and the next funding round is priced partly on it. That incentive is a reason to document the analysis carefully, not a reason to reach the gross answer. Re-flights cost $61,000 last season and belong in cost of services. Credits issued to farmers for poor application, $18,000, are price concessions, a form of variable consideration under ASC 606-10-32-6 and 32-7, so they reduce revenue rather than appearing as an expense. Payment to the pilot is recognized as the service is performed, when the company's obligation to the pilot arises, rather than when cash is paid within 30 days.
Sensitivity to Changes in the Facts
Three facts carry most of the weight, and a change to any of them could flip the answer. First, the coverage guarantee: if the terms of service said the company only arranges for a pilot and makes no promise about the result, the specified service would look like the arrangement itself. Second, the right to direct pilots: if pilots could reject the company's flight plans or choose their own application specifications, the company's control would be weak. Third, pricing: if pilots bid for jobs and farmers chose among bids, the company's discretion would disappear. Management is considering a pilot rating system that lets farmers request a preferred pilot. That change alone would not move control, because the company would still assign the job and guarantee coverage, but the analysis should be updated if the request becomes a binding choice.
Conclusion
The company is the principal for spraying services under ASC 606-10-55-36 through 55-40 and should report revenue gross at $14 per acre, with the $10.50 paid to pilots recognized as cost of services. Napier and Stadler (2020) observe that the revenue standard changed gross versus net conclusions for some firms with platform-like arrangements, which is why this conclusion should be documented and disclosed in the revenue recognition policy note. The company should revisit the analysis if it changes its pilot contracts or coverage guarantee.
References
Financial Accounting Standards Board. (2014). Revenue from contracts with customers (Topic 606) (Accounting Standards Update No. 2014-09). Author.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
Napier, C. J., & Stadler, C. (2020). The real effects of a new accounting standard: The case of IFRS 15 Revenue from Contracts with Customers. Accounting and Business Research, 50(5), 474-503. https://doi.org/10.1080/00014788.2020.1770933
What the ACC 610 Module 2 instructions ask for
The Module Two assignment in ACC 610 usually asks you to research an accounting issue in the FASB Accounting Standards Codification and present the answer in a memo. Expect to state the issue precisely, summarize the relevant facts, identify and cite the authoritative guidance by Topic, Subtopic, Section and paragraph, analyze how it applies, consider alternative treatments and reach a conclusion. Many versions ask you to describe your search process. Quote or closely paraphrase the guidance you rely on, separate facts from analysis, and explain why the alternatives you reject do not fit. The memo should let a reviewer retrace your research and reach the same answer.
How this ACC 610 Module 2 codification research assignment example is built
The memo addresses whether the drone maker is principal or agent for spraying booked through its app. Facts: the company sets the $14 per acre price, contracts with farmers through its terms of service, assigns licensed pilots who are paid $10.50 an acre, guarantees coverage and re-flies at its own cost if a field is missed, and collects payment. The guidance in ASC 606-10-55-36 through 55-40 requires identifying the specified service and assessing whether the entity controls it before transfer. The memo concludes the specified service is spraying, not a booking service, and that the company controls it: it is primarily responsible for fulfillment, bears the re-flight risk and sets price. Revenue is reported gross, with pilot payments in cost of services.
Where the ACC 610 Module 2 rubric puts the points
Rubrics for the ACC 610 research assignment typically score the statement of the issue, the facts, identification and citation of authoritative guidance, analysis, consideration of alternatives, the conclusion and the memo's organization. Top papers cite specific Codification paragraphs, apply each element of the guidance to the facts, address the strongest counterargument and explain how the conclusion would change if key facts differed. Graders reward a clear description of the research path, including the search terms and Topics consulted before the answer was found. Common deductions include citing nonauthoritative sources as support, applying indicators as a checklist without explaining control, ignoring contrary facts and conclusions that do not follow from the analysis.
ACC 610 Module 2 help: the mistakes that cost points
Research memos most often lose points by treating the principal versus agent indicators as a scorecard to be counted rather than evidence about control, or by citing an accounting firm guide in place of the Codification. Memos also slip when they skip facts that point the other way, such as the pilots' own equipment and licenses. If your research question concerns leases, consolidation or another topic, the same memo structure of issue, facts, guidance, analysis, alternatives and conclusion applies. Write the conclusion first in one sentence and make sure every paragraph that follows supports it or addresses a reason to doubt it; that is what a reviewer will test, and it keeps the memo from drifting into a summary of the standard.
Get ACC 610 Module 2 written to your instructions
Send the ACC 610 Module 2 research question and facts. The memo will locate the authoritative guidance, apply it step by step with Codification references, address the strongest alternative and state a supported conclusion. The first is free; plan on about two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 610 Module 2 questions, answered
Where can I find a free ACC 610 Module 2 Codification research sample?
This page includes a full ACC 610 Module 2 research memo on whether a drone maker is principal or agent for app-booked spraying.
How is principal versus agent determined under ASC 606?
By identifying the specified good or service and assessing whether the entity controls it before it is transferred to the customer, using indicators such as primary responsibility, inventory risk and pricing discretion.
What happens to revenue if a company is an agent?
It reports revenue net, as the fee or commission it retains, rather than the gross amount the customer pays.
Are the principal versus agent indicators a checklist?
No. They support the assessment of control; they are not weighted or counted, and the conclusion rests on whether the entity controls the good or service.
How should a Codification research memo be organized?
Issue, facts, authoritative guidance with citations, analysis including alternatives, and conclusion, so a reviewer can follow the reasoning.