Spider We Web Corporation Case Summary

This case focal point on the gross and net revenue recognition. The gross amount billed to a customer because Spider has earned revenue (as a principal) from the sale of the goods or services. Also, the net amount retained (that is, the amount billed to the customer less the amount paid to a supplier) because Spider has earned a commission or fee as an agent.

Spider- Web Corporation, otherwise given as Spider, owns various websites such as your space and bling. Spider makes it money through Ad placement on their websites. These Ads generated through third-party advertisers. The advertisements can also view of on web sites owned by Spider’s network partners.
With respect to revenue recognition, ASC 605-45 provides guidance on whether to report revenue on the basis of the gross amount billed to the customer (as a principal) or the net amount retained by the company (as an agent).
Spider is solely responsible for fulfilling its contracts with the advertisers. Advertisers only bear a settlement together with Spider. In ASC 605-45-55-7, the entity has general inventory risk-before customer order is placed or upon customer return. There is no inventory risk because Spider solely pays the partners then the advertisers pay Spider. Spider does not own anything before the advertiser pays for the service. The service involves Spider providing advertising space for customers. Based on the records provided, the partners only receive payment after advertisers pay