Telkom AR front.qxp

2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Summary of significant accounting policies (continued)
Fixed-line and other (continued)
Data
The Group provides data communication services under postpaid
and prepaid payment arrangements. Revenue includes fees
for installation and activation, which are deferred over the
expected average customer relationship period. Costs incurred
on first time installations that form an integral part of the network
are capitalised and depreciated over the life of the expected
average customer relationship period. All other installation and
activation costs are expensed as incurred. Post-paid and prepaid
service arrangements include subscription fees, typically monthly
fees, which are recognised over the subscription period.
Directory services
Included in other are directory services. Revenue is recognised
when printed directories are released for distribution, as the
significant risks and rewards of ownership have been transferred
to the buyer. Electronic directories’ revenue is recognised on a
monthly basis, as earned.
Sundry revenue
Sundry revenue is recognised when the economic benefit flows
to the Group and the earnings process is complete.
Dealer incentives
Telkom provides incentives to its retail payphone card distributors
as trade discounts. Incentives are based on sales volume and
value. Revenue for retail payphone cards is recorded as traffic
revenue, net of these discounts as the cards are used.
Mobile
The Vodacom Group invoices its independent service providers
for the revenue billed by them on behalf of the Group. The
Group, within its contractual arrangements with its agents, pays
them administrative fees. The Group receives in cash, the net
amount equal to the gross revenue earned less the administrative
fees payable to the agents.
Contract products
Contract products that may include deliverables such as a
handset and 24-month service are defined as arrangements
with multiple deliverables. The arrangement consideration is
allocated to each deliverable, based on the fair value of each
deliverable on a stand-alone basis as a percentage of the
aggregated fair value of the individual deliverables. Revenue
allocated to the identified deliverables in each revenue
arrangement and the cost applicable to these identified
deliverables are recognised based on the same recognition
criteria of the individual deliverable at the time the product or
service is delivered.
Telkom Annual Report 2009 151
Notes to the consolidated annual financial statements (continued)
for the three years ended March 31, 2009
Vodacom revenue from the handset is recognised when the
product is delivered limited to the amount of cash received.
Monthly service revenue received from the customer is recognised
in the period in which the service is delivered. Airtime revenue is
recognised on the usage basis. The terms and conditions of the
bundled airtime products, where applicable, allow the carry over
of unused airtime. The unused airtime is deferred in full. Deferred
revenue related to unused airtime is recognised when utilised by
the customer. Upon termination of the customer contract, all
deferred revenue for unused airtime is recognised in revenue.
Prepaid products
Prepaid products that may include deliverables such as a SIMcard
and airtime are defined as arrangements with multiple
deliverables. The arrangement consideration is allocated to
each deliverable, based on the fair value of each deliverable
on a stand-alone basis as a percentage of the aggregated fair
value of the individual deliverables. Revenue allocated to the
identified deliverables in each revenue arrangement and the
cost applicable to these identified deliverables are recognised
based on the same recognition criteria of the individual
deliverable at the time the product or service is delivered.
• Revenue from the SIM-card representing activation fees is
recognised over the average useful life of a prepaid customer.
• Airtime revenue is recognised on the usage basis. Unused
airtime is deferred in full.
• Deferred revenue related to unused airtime is recognised
when utilised by the customer. Upon termination of the
customer relationship, all deferred revenue for unused airtime
is recognised in revenue.
Upon purchase of an airtime voucher the customer receives the
right to make outgoing voice and data calls to the value of the
airtime voucher. Revenue is recognised as the customer utilises
the voucher.
Deferred revenue and costs related to unactivated starter packs
which do not contain any expiry date, are recognised in the
period when the probability of these starter packs being
activated by a customer becomes remote. In this regard the
Group applies a period of 36 months before these revenue and
costs are released to the consolidated income statement.
Data
Revenue, net of discounts, from data services is recognised
when the Group has performed the related service and
depending on the nature of the service, is recognised either at
the gross amounts billed to the customer or the amount
receivable by the Group as commission for facilitating the
service.