Chapter 5.8 — Commission Accounting

1. Purpose

This chapter defines how travoBooks computes, accrues, recognises, settles, and reconciles commission income from suppliers. Commission in travel comes in several forms — base, override, incentive, segment-count — each with distinct timing and settlement mechanics. The platform models all of them with the same structured approach: identify, accrue, recognise on service-date, settle through BSP or direct invoice, and reconcile against supplier statements.

2. Why it matters in modern travel accounting

Commission is the largest single source of revenue for travel intermediaries that act as agent (Chapter 3.2). Yet it is one of the most poorly tracked areas in industry practice because: - Multiple commission streams overlap (base + override + incentive) - Settlement timing varies (BSP-netted vs quarterly invoice vs annual rebate) - Supplier statements rarely match agent-side ledger out-of-the-box - Commission recall on refund/reissue is easy to miss

A disciplined commission engine turns commission from a black box into a real-time, account-by-account, ticket-by-ticket revenue stream.

3. Industry relevance

The platform supports: - Base / front-end commission — % of base fare, paid in BSP-net (supplier deducts from amount due to BSP) - Override / back-end commission — volume- or revenue-based bonuses paid quarterly/annually as ACMs - Net-net pricing — for NDC and direct-connect, supplier sells at net; partner marks up; "commission" is the markup - Segment-count incentives — e.g., USD 0.50 per segment booked, paid quarterly - Route / market-specific schemes — e.g., 5% additional on Europe routes - Tactical promos — short-window deals

4. Compliance considerations

• IFRS 15 — commission is variable consideration in the agent's contract with the supplier; subject to the "constraint" requirement (only recognise to the extent highly probable not to reverse).
• GAAP — ASC 606 — substantially identical treatment.
• Withholding tax — commission paid across borders may be subject to WHT; recognition gross, tax gross-up handled separately.
• VAT/GST on commission — in many jurisdictions, commission is taxable supply by the agent to the supplier.

5. Business logic

5.1 Commission lifecycle

ESTIMATE (at booking) → ACCRUE (at issuance) → RECOGNISE (at service-date)
                                          → SETTLE (BSP / invoice / ACM)
                                          → RECONCILE (against supplier statement)

5.2 Commission rule resolution

At booking-issuance, the platform resolves applicable commission rules in this order:

1. Booking-specific contract (negotiated for a specific group/tour)
2. Customer-specific pricing profile (if special net rates apply, commission may be zero)
3. Route / market overlay (e.g., "5% extra on Europe routes 2026 Q2")
4. Supplier default schedule (supplier_commission_rules valid at issue date)
5. Platform fallback (zero — never assume commission without explicit rule)

Each match produces a commission line item. Multiple matches may stack (e.g., base + override).

5.3 Accrual at issuance

When a ticket issues, commission is estimated and accrued but deferred:

(Part of issuance JE)
Debit  1109 Commission Receivable from Supplier   C
Credit 2031 Deferred Air Revenue (commission portion) C

Commission Receivable from Supplier (1109) is a sub-ledger of accounts receivable, dimensioned by supplier and booking. It is separate from customer AR — different counterparty entirely.

5.4 Recognition at service-date

Per Chapter 5.7, deferred commission moves to earned at the service-date:

Debit  2031 Deferred Air Revenue                   C
Credit 4011 Air Base Commission Revenue            C

The receivable from supplier (1109) is not yet cleared — that happens at settlement.

5.5 Settlement

Settlement mechanics depend on commission type and supplier:

BSP-net settlement (most common for base commission): The supplier deducts commission from the amount remitted via BSP. Operational: the BSP file shows ticket gross less commission as the net to BSP. When the BSP file is imported (Chapter 11.3), the platform matches per-ticket commission and clears 1109:

At BSP settlement:
Debit  2011 BSP Payable                            X (full ticket value)
Credit 1109 Commission Receivable                  C (cleared)
Credit 1013 Bank — BSP                             X - C (net wire)

Override / ACM settlement (quarterly or annual): Supplier issues an ACM (Chapter 4.6) or a direct invoice covering a defined period. Processing:

Debit  2011 BSP Payable / 1013 Bank                Σ
Credit 1109 Commission Receivable                  Σ (all bookings in period)

If the ACM total exceeds travoBooks' expected accrual, the difference becomes additional revenue (positive variance, recognised in current period).

If the ACM underpays vs expected accrual, the difference is provisioned as revenue reduction in the current period and 1109 is partially written down — or disputed.

Net-net markup (NDC / direct): For principal model bookings, "commission" is structurally the markup. It's recognised as gross revenue per the principal pattern; settlement is via supplier invoice for the net amount.

5.6 Commission recall on refund/reissue

When a refunded ticket originally carried commission: - If service date not yet reached → reverse 1109 Commission Receivable and 2031 Deferred Air Revenue (no P&L impact). - If service date reached and commission recognised → reverse 1109 and post a debit to 4011 Air Base Commission Revenue (current period revenue reduction).

The reversal must be the exact amount accrued for the original ticket — preserving traceability is essential. The commission_accruals table holds per-ticket accrual details.

5.7 Override accrual estimation

Override commissions reward annual volume. The platform supports two policies per supplier:

accrue_expected_rate smooths P&L but requires controlled estimation discipline (per IFRS 15 §56 "highly probable" constraint).

5.8 Commission reconciliation report

The platform generates a monthly commission reconciliation report per supplier showing: - Expected commission accrued (from commission_accruals) - Received commission (from BSP file + ACMs + direct invoices) - Variance (over / under) - Variance breakdown by cause: rate mismatch, refund recall not yet processed, dispute pending, missed ACM

Variances ≥ partner-config threshold automatically open a commission dispute case.

6. Inputs → processing → outputs

Accrue commission at issuance

Embedded in booking-issuance JE (Chapter 4.1). No separate flow.

Override true-up

Input: ACM file or quarterly statement.

Processing: 1. Match ACM lines to bookings in period via (ticket_number, period). 2. Sum expected accrual for matched bookings. 3. Compute variance. 4. Post settlement JE. 5. Post variance JE if non-zero. 6. Mark commission_accruals rows settled_at, settlement_je_id.

Output: Reconciliation report; updated 1109 balance.

7. Module dependencies

8. Security & permissions

9. Validation rules

10. Error handling

Unmatched commission lines from a supplier file are quarantined; they may represent: - Tickets issued before platform onboarding - Tickets issued by another agency code in error - Adjustments for periods already settled (need reopen)

Operations works the quarantine queue; nothing is silently dropped.

11. Real-world examples

A — Base commission, single ticket, BSP-settled

EK ticket BDT 65,400 issued for Beta Corp. Default base commission 6%.

End state: revenue 3,924 recognised; BSP-payable cleared; receivable cleared; cash impact -61,476.

B — Override, quarterly true-up

Beta partner sells BDT 50M of EK tickets in Q2; override schedule: 1% on tickets above BDT 30M threshold = BDT 200K override.

Policy: accrue_expected_rate at 1.0%. Accrued through Q2: BDT 500K (1% of full 50M) per the running estimate.

Q2 ACM arrives: BDT 200K actual (only the above-threshold portion).

This produces a Q2 expense recognition of the over-accrual. Going forward, the partner tightens the estimate.

C — Refund commission recall

Refunded ticket pre-service-date: - Reverse Dr 2031 / Cr 1109 (the original accrual entries). - 1109 cleared; no P&L impact.

Refunded ticket post-service-date: - Original commission was recognised in P&L. - Recall: Dr 4011 / Cr 1109 in current period (revenue reduction).

12. Step-by-step workflow

13. Database tables touched

14. Future scalability

• Predictive accrual model — ML-based forecast for override true-up, reducing P&L volatility at settlement.
• Supplier-statement OCR + auto-match — automated ingestion of PDF / Excel statements.
• Commission API for agents — exposing per-booking expected commission to selling agents (motivates correct fare/class selection).
• Cross-supplier portfolio view — total commission income forecast across all suppliers.

15. Common pitfalls

• ⚠️ Recognising at issuance instead of service-date. Common error; violates IFRS 15.
• ⚠️ Not capturing the rule version at accrual. Rule rates change; the historical accrual must reference the rule version that applied at booking.
• ⚠️ Forgetting recall on refunds. Margin leakage.
• ⚠️ Mixing override true-up into wrong period. Variance landing in wrong quarter distorts reporting.
• ⚠️ Accruing without supporting documentation. Auditors will not accept "estimated" rates without rule-document references.