registration document France Telecom 2009 - Orange.com

financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
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CONSOLIDATED STATEMENTS
Equipment lease revenues are recognized on a straight-line
basis over the life of the lease agreement, except in the case of
fi nance leases which are accounted for as sales on credit.
Content sales
The accounting for revenue sharing arrangements and supply of
content depends on the analysis of the facts and circumstances
surrounding these transactions. To determine if the revenue
must be recognized on a gross or a net basis, an analysis is
performed using the following criteria:
■ the Group is the primary obligor of the arrangement: for
instance, it has discretion in supplier selection, it is involved in
the determination of service specifi cations;
■ the Group bears inventory risk;
■ the Group has a reasonable latitude in establishing price with
the customer for the service;
■ the Group bears the credit risk.
Therefore, revenue-sharing arrangements (Audiotel, premium
rate number, special numbers, etc.) are recognized:
■ gross when the Group has a reasonable latitude in setting
prices and determining the key features of the content
(service or product) sold to the end-customer; and
■ net of amounts due to the service provider when the latter is
responsible for the service and for setting the price to be paid
by subscribers.
Similarly, revenues from the sale or supply of content (audio,
video, games, etc.) via the Group’s various communications
systems (mobile, PC, TV, fi xed line, etc.) are recognized:
■ gross when the Group is deemed to be the primary obligor in
the transaction with respect to the end-customer (i.e. when
the customer has no specifi c recourse against the content
provider), when the Group bears the inventory risk and has a
reasonable latitude in the selection of content providers and
in setting prices charged to the end-customer; and
■ net of amounts due to the content provider when the latter
is responsible for supplying the content to the end-customer
and for setting the price to subscribers.
Service revenues
Revenues from telephone service and Internet access
subscription fees as well as those from the wholesale of access
are recognized in revenue on a straight-line basis over the
subscription period.
Revenues from charges for incoming and outgoing telephone
calls as well as those from the wholesale of traffi c are recognized
in revenue when the service is rendered.
Revenues from the sale of transmission capacity on terrestrial
and submarine cables as well as those from local loop
unbundling are recognized on a straight-line basis over the life
of the contract.
Revenues from Internet advertising are recognized over the
period during which the advertisement appears.
Customized contracts
The Group offers customized solutions in particular to its
business customers. The related contracts are analyzed
as multiple-element transactions (including management
of the telecommunication network, access, voice and data
transmission and migration). The commercial discounts granted
under these contracts if certain conditions are fulfi lled are
recorded as a deduction from revenue based on the specifi c
terms of each contract.
Migration costs incurred by the Group under these contracts
are recognized in expenses when they are incurred, except in
the case of contracts that include an early termination penalty
clause.
Promotional offers
Revenues are stated net of discounts. For certain commercial
offers where customers are offered a free service over a certain
period in exchange for signing up for a fi xed period (time-based
incentives), the total revenue generated under the contract may
be spread over the fi xed, non-cancellable period.
Penalties
The Group’s commercial contracts contain service level
commitments (delivery time, service reinstatement time). These
service level agreements cover commitments given by the
Group on the order process, the delivery process, and after
sales services.
If the Group fails to comply with one of these commitments, it
pays compensation to the end-customer, usually in the form
of a price reduction which is deducted from revenues. Such
penalties are recorded when it becomes probable that they will
due based on the non-achievement of contractual terms.
2.7 Subscriber acquisition and
retention costs, loyalty programs,
advertising and related costs
Subscriber acquisition and retention costs
Subscriber acquisition and retention costs, other than loyalty
programs costs, are recognized as an expense for the period in
which they are incurred, that is to say on acquisition or renewal.
In some cases, contractual clauses with retailers provide for
a profi t-sharing based on the recognized and paid revenue:
the profi t-sharing amount is expensed when the revenue is
recognized.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM
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