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Gross vs. Net Revenue (Apps Store)

I am having a debate with our CEO on what we should recognize as revenue through sales via the Apple App Store.  We sell a product for $10 but we recieve $7 from Apple.  Our CEO is convinced we can recongize the full $10 and show the $3 as COGS.

I know ASC 605-45 guidelines essentailly say that since we are not the primary obligator, we would record only net revenue, however, there is some grey areas since we are doing all of the sales, marketing and support of the product. 

Our there any other thoughts outside of ASC-605-45?




Guido Gallegos
Title: CFO
Company: Private
(CFO, Private) |

I understand Apple will be the party invoicing U$ 10 to the final customer, therefore you could only do the same for U$ 7 to Apple. Unless you invoice the final customer and pay U$ 3 to Apple as a "commission", in which your CEO will achieve his goal....

Topic Expert
J.D. Floyd
Title: Owner, CFO
Company: CFO Outsourcing Solutions, Inc.
(Owner, CFO, CFO Outsourcing Solutions, Inc.) |

My current client is in a very similar situation; Gross, with offset to COGs is my treatment and confirmed by (Big4) auditors.

J.D. Floyd

rowan grant
Title: Big Dog
Company: Gigovate
LinkedIn Profile
(Big Dog, Gigovate) |

Are bonuses paid on revenue? ;)

Jerry Van Dyck
Title: CFO
Company: AES
(CFO, AES) |

How do you justify the $3 COGS when in fact it is you say it is $0? A sales commission would make sense.

Topic Expert
Doug Thompson
Title: Director of Revenue
Company: Castlight Health
(Director of Revenue, Castlight Health) |

The gross-net distinction is more designed to prevent the internet middleman, i.e. Apple in this case, from recording at gross. Since you have the relationship with the customer, fulfill the order, support the app, and (very important) set the price, you can probably record at gross.


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