Revenue for Telecoms

Revenue for Telecoms – Issues In-Depth | 175
10.3 Accounting for payments in the indirect channel |
Handset discount reimbursement
Telco A observes that the reimbursement related to the handset is ultimately
a discount provided to the end customer. This is because there is a direct
correlation between the amount paid to Retail Store X and the discount provided
by Retail Store X to the end customer; the amount is only paid to Retail Store X
when the customer activates the service plan, and Retail Store X provides
evidence of the discount provided to Telco A’s customer. In this arrangement,
Retail Store X passes through a discount to the end customer that is funded by
Telco A. Consequently, Telco A concludes that the reimbursement is consideration
payable to a customer (i.e. the end customer). Telco A recognizes the
reimbursement to Retail Store X as a reduction of the service transaction price.
Example 70 – Payments in the indirect channel: When judgment is
required
Continuing Example 68, Retail Store X acts as a principal in the sale of handsets
to end customers.
The agreement between Telco A and Retail Store X also specifies that Telco A
will make certain payments to Retail Store X when Retail Store X sells a service
plan to a customer. The agreement specifies that the payment is 500 when Retail
Store X sells a service plan with a handset and 100 when Retail Store X sells the
same service plan alone.
Telco A determines that the amount paid to Retail Store X is paid in Retail
Store X’s capacity as an agent, not a customer. This is because the payment is
only payable when Retail Store X sells a service plan to an end customer which, in
the case of service plans, is Telco A’s customer.
Before concluding that the full payment of 500 should be capitalized as a cost to
obtain the service contract, Telco A observes that the difference in the amount
paid between types of contracts sold by Retail Store X may require additional
analysis. In particular, the higher amount paid to Retail Store X when it sells a
handset and a service plan suggests that the amount paid may be something
other than a commission and may represent a reimbursement of discounts
commonly provided to end customers in the purchase of handset and service
arrangements. In assessing whether the payment should be accounted for as
something other than a commission, Telco A considers the difference in the
commission payments and the typical discounts provided to end customers in
the purchase of handset when it is bundled with a service contract. Telco A also
considers other in-market offerings that provide a significant discount on the
handset when it is bundled with a service offering.
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