Assume that Overstock sold you a product for $200 that cost $150. The company's profit on the transaction is clearly $50. Should Overstock recognize $200 in revenue and $150 in cost of goods sold (the group method) OR should it recognize only the $50 in gross profit (the net method) as commission revenue?

Prepare a professional one-page memo in good format to the CEO of Overstock.com to clearly state if they are a principal or agent by thinking about the following questions. Assume the CEO does not have access to the Codification and does not understand revenue recognition rules.

1. Determine the specific Codification citation that indicates what an entity assess to determine what an entity assess to determine whether the nature of it promise is to act as a principal or agent. Access the FASB Accounting Standards Codification at

2. Determine the specific Codification citation that suggest whether an entity is a principal.

3. Often times during research it helps to compare to other companies. Using EDGAR, access Google, Inc's 2013 10-K. Locate the disclosure note that discusses the company revenue recognition policy. Does Google discuss whether they reported revenue on a gross or net basis? Do you agree with Google's reasoning and should you suggest it to Overstock?