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Principal-versus-Agent Considerations in Revenue Recognition Under ASC 606 and Compliance Risk

Kai Du et al.

The Accounting Review2026https://doi.org/10.2308/tar-2022-0298article
FT50UTD24AJG 4*ABDC A*
Weight
0.50

Abstract

Using a dataset constructed through textual analysis and manual data collection, we show that, prior to ASC 606, firms with principal-versus-agent (PA) exposure face heightened GAAP compliance risk, reflected in a greater likelihood of receiving revenue-related SEC comment letters and higher audit fees. Following the adoption of ASC 606, these differences decline, consistent with the standard’s stated goal of simplifying PA assessments and reducing implementation challenges. Overall, our findings provide the first large-sample evidence on PA considerations and show that ASC 606 mitigates compliance risk, although further analyses suggest additional disclosure may be needed to mitigate information challenges associated with PA assessments. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: L86; M41; M42; M48.

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https://doi.org/https://doi.org/10.2308/tar-2022-0298

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@article{kai2026,
  title        = {{Principal-versus-Agent Considerations in Revenue Recognition Under ASC 606 and Compliance Risk}},
  author       = {Kai Du et al.},
  journal      = {The Accounting Review},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.2308/tar-2022-0298},
}

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Principal-versus-Agent Considerations in Revenue Recognition Under ASC 606 and Compliance Risk

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.