Revenue for Telecoms

Revenue for Telecoms – Issues In-Depth | 157
9 Nonrefundable up-front fees |
Yes
Does the fee relate to
specific goods or
services transferred to
customer?
No
Account for as a
promised good or
service
Account for as an
advance payment for
future goods or
services
Recognize allocated
consideration as revenue on
transfer of promised good
or service
Recognize as revenue
when control of future
goods or services is
transferred, which may include
future contract periods
Observations
Up-front fee may need to be allocated
A nonrefundable up-front fee forms part of the transaction price of the contract
and is allocated to performance obligations, including any material right, under the
new standard.
Even when a nonrefundable up-front fee relates to a promised good or service,
the amount of the fee may not equal the relative stand-alone selling price of that
promised good or service; therefore, some of the nonrefundable up-front fee may
need to be allocated to other performance obligations (see 5.2).
Telecom entities also consider how the up-front fee affects the determination
of the stand-alone selling price of the goods or services promised in the
arrangement because, in some cases, it may be appropriate to add it to the standalone
selling price of just one of the performance obligations (see Example 66
in 9.2).
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