When selling digital products or services through third-party platforms such as the Apple App Store, companies often face a core accounting question: how should sales revenue generated through the platform be recorded in the books? Apple typically charges a 30% commission on the customer's payment price, with the remaining 70% returned to the developer or seller. This revenue-sharing structure directly affects the amount and method of revenue recognition.

Key Question: Net Method or Gross Method?

Specifically, companies need to determine which of the following two approaches is more consistent with accounting standards:

  • Approach 1 (Net Method): Only recognize the actual 70% received as revenue, without separately recording the 30% commission charged by Apple.
  • Approach 2 (Gross Method): Record the full sales price charged by Apple to global customers (converted to US dollars), treat 30% as commission expense (the specific expense account needs to be clarified), and recognize the remaining 70% as revenue.

The questioner further asks: what do most SaaS companies actually do when selling through third-party channels such as the App Store or Groupon? Can they record only net revenue, or must they also record the fees paid to third parties?

Accounting Principle: Principal vs. Agent

Under IFRS 15 and US GAAP (ASC 606), the core of revenue recognition lies in determining whether the company acts as aprincipalor anagent. If the company has control over the goods or services before transferring them to the customer, revenue should be recognized on a gross basis; if it merely acts as an agent, revenue should be recognized on a net basis (i.e., the amount received less the amount paid to the platform).

In the typical Apple App Store scenario, Apple handles payment, download, and some customer support for end users, while developers typically do not have direct contact with end customers and do not bear return or credit risks. Therefore, in most cases, developers are considered agents and should use thenet methodto recognize revenue, i.e., recording only the 70% returned by Apple.

Common Practices in the SaaS Industry

In the SaaS industry, when selling subscriptions or digital products through third-party app stores (such as the Apple App Store or Google Play) or promotional platforms (such as Groupon), the mainstream approach is the net method. The reasons are as follows:

  • The platform dominates the sales process, including pricing, payment collection, and refund handling.
  • Developers cannot directly control customer relationships and typically do not bear bad debt risk.
  • The commission charged by the platform is fixed (e.g., 30% for Apple) and represents consideration for the platform's services, not a component of the company's own revenue.

Therefore, in practice, most SaaS companies record only the actual amount received (after deducting platform commissions) as revenue and do not separately list the platform commission as an expense. This approach simplifies accounting treatment and aligns with the substance-over-form principle of revenue recognition.

When Is the Gross Method Required?

If the company can demonstrate that it has control over the goods or services, for example:

  • The company sets the sales price itself, and the platform only provides a payment channel;
  • The company directly provides after-sales service to customers or bears the primary performance obligation;
  • The company bears inventory risk or credit risk.

In these cases, the company may be considered the principal and must recognize revenue on a gross basis, treating fees paid to the platform as selling expenses or commission expenses. However, it should be noted that this situation is relatively rare in App Store sales, unless the company distributes through its own channels or customized applications.

Practical Recommendations and Uncertainty Notes

Given that revenue recognition involves specific contract terms and the substance of the transaction, companies are advised to make judgments based on the following factors:

  1. Review the developer agreement signed with Apple to clarify the rights, obligations, and risk allocation between the parties.
  2. Assess whether the company bears primary responsibility to end users, such as refunds and complaint handling.
  3. Consult professional accountants or auditors to ensure compliance with applicable accounting standards (such as ASC 606 or IFRS 15).

It should be noted that differences may arise across jurisdictions or under specific contractual arrangements. The above analysis provides only general guidance and does not constitute specific accounting advice. For larger companies or those involved in cross-border transactions, a detailed technical assessment is recommended.

Summary: In the Apple App Store sales scenario, most SaaS companies use the net method, recording only the 70% net revenue without separately presenting the 30% commission. However, the final determination should be based on an assessment of control and reference to professional advice.