Revenue for Telecoms

Revenue for Telecoms – Issues In-Depth | 121
6.3 Measuring progress toward complete satisfaction of a performance obligation |
By contrast, the new standard introduces new concepts and uses new wording
that telecom entities need to apply to the specific facts and circumstances of
individual performance obligations. Subtle differences in contract terms could
result in different assessment outcomes – and therefore significant differences in
the timing of revenue recognition compared with current practice.
Comparison with current US GAAP
Some similarities, but new concepts to be applied
Criteria 1 and 3 of the new standard will require telecom entities to think
differently about the satisfaction of performance obligations. In general,
the impact of applying the criteria will vary depending on relevant facts and
circumstances, and subtle differences in contract terms could result in different
assessment outcomes. These different assessments could create significant
differences in the timing or pattern of revenue recognition.
6.3 Measuring progress toward complete
satisfaction of a performance obligation
Requirements of the new standard
606-10-25-31 – 25-35, 55-17 – 55-21
[IFRS 15.39–43, B15–B19]
For each performance obligation that is satisfied over time, an entity applies a single
method of measuring progress toward complete satisfaction of the obligation. The
objective is to depict the transfer of control of the goods or services to the customer.
To do this, an entity selects an appropriate output or input method. It then applies that
method consistently to similar performance obligations and in similar circumstances.
Method Description Examples
Output
Based on direct
measurements of the value
to the customer of goods or
services transferred to date,
relative to the remaining
goods or services promised
under the contract
– Surveys of performance to
date
– Appraisals of results achieved
– Milestones reached
– Time elapsed
Input
Based on an entity’s efforts
or inputs toward satisfying
a performance obligation,
relative to the total expected
inputs to the satisfaction of
that performance obligation
– Resources consumed
– Costs incurred
– Time elapsed
– Labor hours expended
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