The main accounting risk in a TSL company is incorrect gross presentation of forwarding activity. A company may show tens of millions in additional revenue without any change in profit. The effect is still material: distorted margin ratios, revenue covenants and comparability with prior periods.
Agent vs principal: the key IFRS 15 judgement
IFRS 15 paragraphs B34-B38 require the company to determine whether it controls the service before it is transferred to the customer. A principal controls the transport service and recognises the full freight charge. An agent arranges for another party to provide the service and recognises only its commission or margin.
In practice, a carrier using its own fleet and drivers is usually a principal. A forwarder arranging transport through subcontractors is often an agent. Many TSL companies operate mixed models, so the accounting system and the revenue policy must distinguish shipment types consistently.
| Indicator | Principal | Agent |
|---|---|---|
| Primary responsibility | Responsible for transport performance | Arranges service by another carrier |
| Pricing discretion | Sets the freight price | Earns a margin on subcontracted transport |
| Revenue | Gross freight revenue | Net forwarding margin |
Revenue cut-off and accruals
Transport services often span the year-end. The auditor checks whether shipments completed in December but invoiced in January have been accrued, and whether in-transit services are treated consistently with the revenue policy.
- Point in time: revenue is recognised when delivery is confirmed, usually by POD or CMR.
- Over time: revenue accrues by distance, time or another measure of progress.
- Advances from customers: payments received before service completion are contract liabilities, not revenue.
The audit trail should reconcile the TMS open-shipment report to the revenue accrual schedule and the accounting ledger.
CMR provisions, customer claims and SLA penalties
CMR claims are an accounting estimate. Waiting for the insurer's decision does not remove the need to recognise a provision if an outflow is probable and can be estimated. The auditor reviews the claims register, legal correspondence, insurance coverage and historical settlement pattern.
Customer penalties and service-level credits may reduce revenue or require provisions. The important point is consistency: similar claims should be treated in the same way and supported by evidence.
Fleet leases and IFRS 16
For IFRS reporters, leased tractors, trailers, vans, warehouses and terminals usually create right-of-use assets and lease liabilities. A TSL company with a large leased fleet can see a significant increase in total assets, net debt and leverage ratios.
The auditor tests lease completeness, discount rates, extension options, modifications and the split between lease contracts and pure service contracts.
Pre-audit checklist for TSL companies
- Revenue policy for agent vs principal and shipment cut-off.
- Year-end TMS report for open and completed-not-invoiced freight.
- Reconciliation of revenue accruals to TMS and customer contracts.
- CMR and customer claims register with provision assessment.
- Complete lease register for vehicles, warehouses and equipment.
- Insurance policies and confirmations for material claims.
Frequently asked questions
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JMFC audits transport, forwarding and logistics companies, including IFRS 15 revenue presentation, claims provisions and IFRS 16 lease registers.
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