A freight forwarder reports revenue gross when it acts as a principal (the whole customer invoice is revenue, and the carrier cost sits in direct costs) and net when it acts as an agent (only the fee or margin is revenue). The test under both IFRS 15 and US GAAP (ASC 606) is not who holds the contract paperwork or who pays whom first. It is whether the forwarder controls the transport service before it reaches the customer. The same gross profit can therefore sit under a very different revenue line, which changes your percentage margins, your KPIs and sometimes your tax filings. This post explains the test, applies it to common forwarder set-ups, and shows what two listed forwarders disclose.
It sits next to the posts on job costing, accruals and disbursements and pricing and margin, which cover how to calculate a job. This one covers how the result is presented.
What does principal versus agent mean in revenue recognition?
IFRS 15 (Revenue from Contracts with Customers) deals with this in paragraphs B34 to B38, and the US equivalent is ASC 606-10-55-36 onward. The logic is the same in both. For each specified good or service promised to the customer, the entity asks whether it controls that service before it is transferred. If it does, it is a principal and recognises the gross amount it expects to be entitled to. If it only arranges for another party to provide the service, it is an agent and recognises the fee or commission it keeps.
Three points matter in practice:
- The assessment is per service, not per contract. One forwarding contract can contain a principal element (ocean freight) and an agent element (arranging insurance or a third-party haulage leg). The IFRS Foundation and Deloitte's US guidance both describe the assessment as made for each specified service.
- Control comes first. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from, the service. The indicators below support that assessment and do not replace it.
- It takes judgement. Standard setters expect different indicators to carry different weight in different contracts, so two forwarders with similar operations can reach a different answer.
What are the principal indicators, and how do they apply to a forwarder?
IFRS 15 paragraph B37 lists indicators that include, but are not limited to, primary responsibility for fulfilling the promise, inventory risk before the service is transferred, and discretion in establishing the price. ASC 606 uses the same three. KPMG's November 2016 publication on the freight and logistics industry also notes that customer credit risk, which older US GAAP used as an indicator, is not in the new standard.
| Indicator | Points to principal | Points to agent |
|---|---|---|
| Primary responsibility for fulfilment | You issue the house bill of lading or air waybill and answer to the shipper for the movement, whoever carries it | The carrier or another party is responsible to the customer and you only introduce and book |
| Inventory risk | You commit to buy space (block space, a charter, a fixed-price contract) before you have a customer for it | You buy space only after the customer has agreed, with no commitment of your own |
| Discretion in setting the price | You quote an all-in sell rate and keep the difference to your buy rate | The carrier's tariff is passed through and you add a fixed handling fee |
Inventory risk is the weakest indicator for most forwarders, because many only buy space after winning the job. KPMG's own worked example of a logistics company that contracts a third-party carrier only after signing with its customer still concludes it is a principal, because it is primarily responsible for the shipment, sets the price and chooses the supplier, and it recognises revenue gross. The absence of one indicator did not decide the answer.
Is a forwarder that issues its own bill of lading a principal?
Usually the evidence leans that way, but the document alone does not decide it. A forwarder or NVOCC that issues its own house bill of lading (see bill of lading types explained) typically takes on the carrier's obligations to the shipper for the movement, sets its own sell rate and chooses the underlying carrier. Those facts point to control of the transport service. See the difference between an NVOCC and a freight forwarder.
A forwarder that only books on the customer's behalf, where the customer holds the contract with the ocean carrier and the forwarder charges a handling fee, looks like an agent. Expeditors' FY2025 Form 10-K (signed February 2026) describes exactly this split. For direct ocean forwarding it says its subsidiary acts as an agent of the customer and earns handling fees. For its main air and ocean business, it says in the MD&A that in most cases it acts as an indirect carrier and that the rate billed to customers (the sell rate) is recognised as revenue, with the buy rate in operating expenses.
An NVOCC or consolidator selling its own LCL or air service sits at the principal end, because it is the contracting carrier towards the shipper, which is a strong primary-responsibility fact. Insurance, a third-party haulage leg or any service you merely introduce is often an agent item, assessed on its own. These are leanings, not rules, so ask your accountant to document the conclusion for each service line; auditors and tax authorities will ask for the reasoning.
What do Expeditors and DSV actually report?
Both show gross revenue and put carrier costs in a separate line, which is the principal presentation, but they define the lines differently, so their percentages are not comparable. All figures below are from the companies' own reports.
- Expeditors (FY2025 Form 10-K, filed February 2026): total revenues of $11,069,009 thousand, and directly related cost of transportation and other expenses of $7,402,081 thousand. The difference, about $3.67 billion or roughly 33% of revenue, is my own subtraction and not a company-reported figure. The 10-K says performance obligations are typically satisfied over time as services are rendered.
- DSV (Annual Report 2023, notes 2.2 and 2.3): revenue of DKK 150,785 million, direct costs of DKK 106,967 million and gross profit of DKK 43,818 million, a reported gross margin of 29.1%. DSV defines direct costs as costs paid to generate the revenue, including settlement with hauliers, shipping companies and airlines, and also hourly-paid warehouse staff. Its 2025 announcement of 4 February 2026 reports revenue of DKK 247,331 million and gross profit of DKK 66,859 million, a year that includes the Schenker acquisition.
The lesson is not that gross is the only answer. Expeditors itself reports agent-style fee revenue for direct ocean forwarding and gross revenue elsewhere. And the DSV figures show why revenue is a poor yardstick: in its 2023 report, revenue fell by 34.1% in constant currencies while gross profit fell by 13.4%, because lower freight rates shrink the pass-through part of the invoice far more than the margin.
How does gross versus net change the numbers?
An illustrative job: the customer is invoiced USD 3,000 for the freight and your handling, the carrier invoices you USD 2,400, and you also pay USD 1,000 of import duty for the importer. All figures are invented for the example.
| Presentation | Revenue | Direct cost | Gross profit | Margin on revenue |
|---|---|---|---|---|
| Principal (gross) | 3,000 | 2,400 | 600 | 20% |
| Agent (net) | 600 | 0 | 600 | 100% |
Profit is identical. Revenue, direct costs and the margin percentage are not. The USD 1,000 of duty appears in neither revenue line in either case; it is a pass-through discussed next. This is why a forwarder reporting 20% on one basis and a competitor reporting 100% on the other have told you nothing about who earns more per shipment.
How are duties, taxes and disbursements treated?
Amounts you collect for someone else are not your revenue. IFRS 15 excludes amounts collected on behalf of third parties from the transaction price (paragraph 47), and DSV's policy states that revenue is measured excluding VAT and other taxes collected on behalf of third parties. Expeditors' 10-K says cash advances to customers for duties and taxes owed to customs authorities are a pass-through and are not recorded as a component of revenue and expense.
Two practical consequences:
- Your fee for clearing the goods is revenue; the duty is a balance-sheet item. Fronting duty creates a receivable from the importer, which belongs in your credit control view even though it never touches the profit and loss account.
- Do not reclassify carrier freight as a disbursement to look net. A genuine disbursement is a cost you incur as the customer's agent, usually billed at cost and tied to the customer's own liability. Ocean freight you sell under your own bill of lading is not that. How a disbursement is treated for VAT or GST follows its own national rules and conditions, so check the local position before you rely on a pass-through label.
When is forwarding revenue recognised?
For most transport services, over time rather than on delivery. KPMG's 2016 publication explains that under the new standard transportation companies no longer have a policy choice: because the customer simultaneously receives and consumes the benefit as the freight moves, revenue is generally recognised over time, with a point-in-time answer only if none of the over-time criteria is met. DSV's 2023 policy recognises service revenue over time as milestones and performance obligations are fulfilled, and Expeditors says the same about its services.
For a forwarder, a shipment that sails on 28 October and arrives on 12 November straddles two months, so part of the revenue and its matching direct cost belongs in October even if the invoice goes out in November. Keep sailing and arrival dates in your system, because KPMG notes a company that subcontracts the shipping needs information to measure progress. Smaller businesses under a local or SME framework may be allowed simpler policies; ask your accountant.
What does it mean for margin benchmarking and KPIs?
- Compare gross profit, not revenue. Gross profit (revenue less direct costs) is comparable across gross and net presenters; revenue and margin-on-revenue are not. See the forwarder KPI guide for gross profit per shipment, per TEU and per kilogram.
- Percentage margins move with freight rates. If rates halve and your margin per box stays the same, your margin percentage on gross revenue doubles without any change in performance.
- Read the definitions before benchmarking. DSV, for example, includes some staff costs in direct costs. If you change your own presentation, restate prior periods before comparing trends.
What about tax?
The accounting label does not settle tax. Corporate income tax usually starts from accounting profit, which gross versus net presentation does not change, but turnover-based thresholds (VAT or GST registration, small-business regimes, audit exemptions) can be triggered by reported revenue. VAT or GST on international transport and disbursements follows national rules, so confirm the tax position separately from the accounting position.
What to do next
- List your service lines and, for each, write down who is responsible to the customer, who sets the price and who holds the carrier contract.
- Conclude principal or agent per service line, record the reasoning, and have your accountant or auditor agree it.
- Check that duties, taxes and true disbursements are coded as balance-sheet pass-throughs and that carrier freight is in direct costs.
- Report gross profit and gross profit per shipment or unit alongside revenue, and accrue in-transit jobs at each month end.
Looking for overseas partners or carriers to quote against your own sell rate? More than 29,300 logistics companies are searchable by country and service in the CargoLinked directory, and the public requests board lists freight that shippers have posted for forwarders to quote on directly. If you work with network partners, the notes on agency agreements and agent settlement cover the cash side of those relationships. Note that "agent" there means a commercial partner, which is a different idea from an agent in the accounting sense used here.
This is general accounting information, not accounting, audit, tax or legal advice. Principal versus agent conclusions depend on the facts of each contract and on the reporting framework you use. Figures quoted from company reports are as published at the dates stated. Confirm your treatment with a qualified accountant or auditor and check the current text of the standards.
