Priceline.com
1. At the moment Priceline recognizes revenue using the gross method whereby the offered price $250 net of taxes and fees is recognized as revenue and $200 is recognized as cost of goods sold. The alternative would be to use the net method where only the 20% commission is recognized as revenue. It is important to distinguish between who bares the risks and benefits of the transaction. (SEC Staff Accounting Bulletin #101, Q10). Despite Priceline being the merchant of record, they are only an agent and therefore do not assume the risks and rewards involved in the transaction. Consequently Priceline is inappropriately recording revenue under the gross method.

2. The alternative method would be to record it under the net method where $50 is recorded (20% of $250) is recorded as commission revenue.

3. I would recommend the company use the net method because that would be in better accordance with SAB 101 or GAAP. It would appropriately record the amount of revenue......

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Title: Reporting Income For Dot-Coms
Approximate Word Count: 689
Approximate Pages: 3 (250 words per double-spaced page)

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