Revenue for Telecoms

More documents

Recommendations

Info

178 | Revenue for Telecoms – Issues In-Depth | 11 Repurchase agreements Forward (a seller’s obligation to repurchase the asset) Call option (a seller’s right to repurchase the asset) The customer does not obtain control of the asset Asset repurchased for less than original selling price? Yes Lease arrangement* No Financing arrangement * Under US GAAP, if the contract is part of a sale-leaseback transaction then it is accounted for as a financing arrangement. A put option 606-10-55-72 – 55-73 [IFRS 15.B70–B71] If a customer has a right to require the entity to repurchase the asset (a put option) at a price that is lower than the original selling price, then at contract inception the entity assesses whether the customer has a significant economic incentive to exercise the right. To make this assessment, an entity considers factors including the: – relationship of the repurchase price to the expected market value of the asset at the date of repurchase; and – amount of time until the right expires. 606-10-55-72, 55-74 [IFRS 15.B70, B72] 606-10-55-75, 55-78 [IFRS 15.B73, B76] 606-10-55-77 [IFRS 15.B75] If the customer has a significant economic incentive to exercise the put option, then the entity accounts for the agreement as a lease. Conversely, if the customer does not have a significant economic incentive, then the entity accounts for the agreement as the sale of a product with a right of return (see 10.1 in Issues In-Depth, Edition 2016). If the repurchase price of the asset is equal to or greater than the original selling price and is more than the expected market value of the asset, then the contract is accounted for as a financing arrangement. In this case, if the option expires unexercised, then the entity derecognizes the liability and the related asset and recognizes revenue at the date on which the option expires. When comparing the repurchase price with the selling price, the entity considers the time value of money. Home © 2016 KPMG LLP, a Delaware limited liability partnership and the US member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. © 2016 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.
Revenue for Telecoms – Issues In-Depth | 179 11 Repurchase agreements | Put option (a customer’s right to require the seller to repurchase the asset) Repurchase price equal to or greater than original selling price? Yes Repurchase price greater than expected market value of asset? No No Customer has significant economic incentive to exercise the put option? Yes Yes No Financing arrangement Lease* Sale with a right of return * Under US GAAP, if the contract is part of a sale-leaseback transaction then it is accounted for as a financing arrangement. Example 71 – Handset trade-in Telco T enters into a 24-month wireless service contract with Customer C. At contract inception, Telco T transfers to Customer C a handset for 600, together with a right to trade in that handset for 100, at the end of the service contract. The stand-alone selling price of the handset at contract inception is 600. Telco T expects the handset market value to be 150 in 24 months. Telco T’s obligation to repurchase the handset at the customer’s option is a put option. Telco T assesses, at contract inception, whether Customer C has a significant economic incentive to exercise the put option, to determine the accounting for the transfer of the handset. Telco T concludes that Customer C does not have a significant economic incentive to exercise the put option because the repurchase price of 100 is lower than the expected market value of 150. Additionally, customers usually have easy access to the second-hand market to resell similar phones. Telco T determines that there are no other relevant factors to consider when assessing whether Customer C has a significant economic incentive to exercise the put option. Consequently, Telco T concludes that control of the handset transfers to Customer C because Customer C is not limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the handset. Telco T therefore accounts for the transaction as a sale with a right of return (see 10.1 in Issues In-Depth, Edition 2016). © 2016 KPMG LLP, a Delaware limited liability partnership and the US member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. © 2016 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. Home
Page 1 and 2:
Revenue for Telecoms Issues In-Dept
Page 3 and 4:
Facing the challenges The new reven
Page 5 and 6:
Revenue for Telecoms - Issues In-De
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130: Revenue for Telecoms - Issues In-De
Page 179: Revenue for Telecoms - Issues In-De
show all

Revenue for Telecoms

Create successful ePaper yourself

Delete template?

Save as template?