How should the turnover and revenue of platform-based enterprises (such as Airbnb/Etsy) be defined?
Regarding the accounting treatment of online service platforms (such as Airbnb/Etsy), this article uses a service transaction as an example to analyze whether the platform's turnover should include only the 5% commission or the total amount of 105 euros including the commission. The article points out that the two approaches correspond to the net method and the gross method, respectively, and judgment should be based on criteria such as whether the platform bears primary responsibility.
When building an online platform that allows individuals to offer services, a key accounting question arises: how should the platform's own turnover be defined? To make it easier to understand, let's illustrate with a specific case.
Suppose a service design expert X publishes their service on the platform, priced at 100 euros. Company Y urgently needs design support for its new client proposal and decides to hire X through the platform. The platform charges a 5% commission on the transaction amount, which is 5 euros.
Core question: the scope of platform turnover
In the platform's financial statements, should turnover only record the commission income (5 euros), or should it record the total transaction amount (105 euros) and simultaneously recognize 100 euros as cost of sales? This choice directly affects the amount of revenue recognized and the structure of the statements.
Accounting logic of the two approaches
- Net method (commission only): The platform only recognizes 5 euros of commission income, because the platform acts as an intermediary in this transaction and does not bear inventory risk or primary performance obligations. This method is common among asset-light platforms such as Airbnb and Etsy, where revenue only reflects service fees or commissions.
- Gross method (including total transaction amount): The platform recognizes 105 euros of turnover and lists 100 euros as cost of sales. This method applies when the platform has control over the transaction, such as in self-operated sales or when it bears primary responsibility.
Basis for judgment: International Financial Reporting Standards (IFRS)
According to IFRS 15 (Revenue from Contracts with Customers), an entity needs to assess whether it controls the goods or services before transferring them to the customer. If the platform only provides matching services and does not control the service itself, the net method is used; if the platform directs the provision of services or bears primary risks, the gross method is used.
In practice, most platform companies (such as Airbnb and Etsy) typically use the net method, because their core value lies in connecting supply and demand, not in providing the underlying service.
Application to the case
In your case, the platform is only responsible for matching X and Y; the service is provided directly by X, and the platform does not participate in service delivery or quality control. Therefore, the platform should only recognize the 5 euros commission as turnover and does not need to recognize the 100 euros cost. If the platform additionally provides guarantees, payment processing, or bears refund responsibility, then the gross method may need to be reassessed.
It is recommended to consult a professional accountant to determine the most appropriate revenue recognition model based on specific contract terms and the substance of the business.
Thank you for your question, and best wishes for the smooth development of your platform!
—Elke