App store revenue: principal or agent

Mobile apps and games mostly reach users through a few app stores, which collect payment, keep a commission and pass the rest to the developer. Whether the developer reports the full price paid by users or only what it receives changes reported revenue by up to 30% and moves gross margin, though not profit. This guide applies IFRS 15's principal or agent guidance to app store sales, works through an example, and covers virtual items, subscriptions, refunds, sales taxes and the platform's own accounting.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. 4 minute read.

Short answer

App store revenue raises a principal or agent question for developers that sell apps, subscriptions and in-app purchases through platforms such as Apple's App Store and Google Play, which collect payment from users and keep a fee. If the developer controls the app or digital item before it reaches the user, typically because it provides and supports the content and sets the price, it is the principal: revenue is the price the user pays, and the platform fee is a cost. If the platform is the developer's customer, revenue is the net amount received. Many game and app developers conclude they are principal, but it depends on the facts and the platform terms. Durable virtual items are recognised over the period the user benefits from them. In this guide's example, US$ 1,000 thousand of user purchases with a 30% fee gives revenue of 1,000 thousand gross or 700 thousand net.

At a glance

Key question
Who controls the app or item?
Developer is principal
Gross revenue, fee as a cost
Platform is the customer
Net revenue
Consumable items
Recognised when used
Durable items
Over the paying user's life
Taxes collected by platform
Excluded from revenue
App store revenue: principal or agentKey question: Who controls the app or item?; Developer is principal: Gross revenue, fee as a cost; Platform is the customer: Net revenue; Consumable items: Recognised when used; Durable items: Over the paying user's life; Taxes collected by platform: Excluded from revenue.KEY FACTS AT A GLANCEApp store revenue: principal or agentKey questionWho controls the app oritem?Developer is principalGross revenue, fee as acostPlatform is the customerNet revenueConsumable itemsRecognised when usedDurable itemsOver the paying user'slifeTaxes collected by platformExcluded from revenueTax BakersApp store revenue: principal or agentKey question: Who controls the app or item?; Developer is principal: Gross revenue, fee as a cost; Platform is the customer: Net revenue; Consumable items: Recognised when used; Durable items: Over the paying user's life; Taxes collected by platform: Excluded from revenue.KEY FACTS AT A GLANCEApp store revenue: principal oragentKey questionWho controls the app or item?Developer is principalGross revenue, fee as a costPlatform is the customerNet revenueConsumable itemsRecognised when usedDurable itemsOver the paying user's lifeTaxes collected by platformExcluded from revenueTax Bakers
Key facts at a glance, as set out in this guide.

Who is the customer in an app store sale?

Three parties are involved: the user, the platform and the developer. Platform agreements often describe the platform as the developer's agent or commissionaire for selling to users, but the legal description does not decide the accounting. IFRS 15 asks whether the developer controls the specified good or service, the app, subscription or virtual item, before it is transferred to the user. If it does, the developer is the principal and the user is its customer, with the platform acting as an agent that provides distribution and payment services. If the platform controls the app or item before passing it to the user, the developer's customer is the platform, and the developer's revenue is what the platform pays it.

How is app store revenue assessed under IFRS 15?

Is the developer the principal for app store sales?Is the developer the principal for app store sales?Does the developer create, hostand support the app or item?NoPlatform may beprincipal: netYesDoes it set the price,within platform price points?Not alwaysWeigh the otherindicatorsYesDeveloper is principal: gross revenue
Control of the app or item before transfer decides.

The indicators of control point the same way in most cases. The developer is usually primarily responsible for fulfilling the promise to the user: it creates the content, runs the game servers, keeps the app working and supports users beyond payment issues. Inventory risk is limited for digital goods, but the developer bears the cost and risk of developing them. The developer usually sets the price, within the platform's price points. The platform processes payments, distributes the app, handles refunds under its own policies and often collects sales taxes, activities consistent with an agent. See IFRS 15 principal versus agent.

App store revenue: gross or net

In a year, users spend US$ 1,000 thousand on a game's in-app purchases. The platform keeps 30% and pays the developer 700 thousand.

Revenue under each conclusion (US$ thousand)Revenue under each conclusion (US$ thousand)1,000Developer is principal700Platform is the customerReceived from platformPlatform fee
Gross presentation adds the platform fee to both revenue and costs.
US$ thousandDeveloper is principalPlatform is the customer
Revenue1,000700
Platform fees in cost of revenue(300)None
Revenue less platform fees700700

Profit is the same, but revenue and gross margin differ. Platform fees are commonly between 15% and 30%, with lower rates for small developers and many subscriptions, and some markets now allow alternative payment options with different fees. A developer that is principal needs the gross amounts paid by users from the platform's reports, after removing sales taxes, which can take some work across many countries and price points.

How are virtual items and currency recognised?

Consumable items, such as an extra life used straight away, are recognised when they are consumed. Durable items that the user keeps, such as characters or cosmetic skins, oblige the developer to keep providing access to them in the game, so revenue is recognised over the estimated period they remain available to the user, often the estimated average life of a paying player. If durable item sales are US$ 120 thousand in January and paying players stay for about 12 months, revenue is 10 thousand a month for a year. Virtual currency is a contract liability until it is spent on items, which are then recognised as above, and currency expected never to be spent is breakage, recognised in proportion to the currency that is used. Estimates of player life are updated prospectively.

How are app subscriptions, trials and refunds treated?

Subscriptions bought through an app store follow the same principal or agent analysis and are recognised over the subscription period. Free trial periods are not part of a contract until the user pays; see free trials and introductory discounts. Refunds granted by the platform reduce revenue, and expected refunds are estimated as variable consideration. Usage-priced features in apps follow usage-based pricing.

How are sales taxes and platform fees presented?

In many countries, the platform is treated as the seller for VAT or sales tax and collects and remits it. Amounts collected on behalf of third parties, including tax authorities, are excluded from revenue. When the developer is principal, platform fees are part of cost of revenue. When revenue from durable items is deferred, the related platform fees are incremental costs of obtaining those contracts, so they may be capitalised and recognised in line with the revenue rather than expensed immediately.

How does the platform account for third-party app sales?

The platform usually concludes it is an agent for third-party apps and recognises only its commission as revenue, while its own apps and services are recognised gross. This is the same analysis online marketplaces make; see marketplace principal or agent. US GAAP applies the same control-based principal versus agent guidance in ASC 606; see ASC 606 principal versus agent and SaaS accounting.

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Questions people ask

Do app developers report revenue gross or net of app store fees?

Gross if the developer is principal, because it controls the app or item before the user receives it; net if the platform is its customer.

Does the platform agreement decide principal or agent?

No. The legal label is a factor, but IFRS 15 looks at who controls the good or service before it is transferred to the user.

How is revenue from durable virtual items recognised?

Over the estimated period the item remains available to the user, often the average life of a paying player.

Are sales taxes collected by app stores part of revenue?

No. Amounts collected on behalf of third parties, such as tax authorities, are excluded from revenue.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers
  2. FASB Accounting Standards Codification: Topic 606, Revenue from Contracts with Customers
  3. Financial Accounting Standards Board: Revenue recognition

Rules and fees change. If you are reading this long after October 8, 2026, confirm the figures with the source before you rely on them.

IFRS 15Principal or agent: gross or net revenue under IFRS 15Technology and SaaSSaaS accounting: the key issuesRetailOnline marketplaces: principal or agent

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This guide is general information. It is not tax or legal advice for your situation.