Revenue for Telecoms

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Contents Facing the challenges 1 Introduction 2 Putting the new standard into context 6 1 Scope 9 1.1 In scope 9 1.2 Out of scope 10 1.3 Partially in scope 13 1.4 Portfolio approach 17 2 Step 1: Identify the contract with a customer 19 2.1 Criteria to determine whether a contract exists 19 2.2 Consideration received before concluding that a contract exists 30 2.3 Combination of contracts 35 3 Step 2: Identify the performance obligations in the contract 38 3.1 Criteria to identify performance obligations 38 3.2 Distinct goods or services 42 3.3 Telecom equipment 47 3.4 Telecom services 50 3.5 Installations 56 3.6 Other telecom services, fees and administrative tasks 59 3.7 Incentives and promotional giveaways 61 3.8 Warranties 63 4 Step 3: Determine the transaction price 67 4.1 Contractual minimum commitment or contracted service amount? 70 4.2 Variable consideration (and the constraint) 73 4.3 Consideration payable to a customer 81 4.4 Significant financing component 87 4.5 Noncash consideration 93 5 Step 4: Allocate the transaction price to the performance obligations in the contract 96 5.1 Determine stand-alone selling prices 97 5.2 Allocate the transaction price 102 5.3 Changes in the transaction price 111 6 Step 5: Recognize revenue when or as the entity satisfies a performance obligation 113 6.1 Transfer of control 115 6.2 Performance obligations satisfied over time 118 6.3 Measuring progress toward complete satisfaction of a performance obligation 121 6.4 Performance obligations satisfied at a point in time 125 6.5 Enterprise contracts – Bill-and-hold and customer acceptance 127 7 Contract costs 128 7.1 Costs of obtaining a contract 128 7.2 Costs of fulfilling a contract 134 7.3 Amortization 139 7.4 Impairment 143 8 Customer options for additional goods or services 146 8.1 Determining if a material right is created by contract options 146 8.2 Measuring and accounting for material rights 151 9 Nonrefundable up-front fees 156 9.1 Assessing if nonrefundable up-front fees convey a material right 158 9.2 Accounting for nonrefundable up-front fees that do not convey a material right 161 10 Indirect channel sales 165 10.1 Determining who the customer is and when control transfers 165 10.2 Combining contracts in the indirect channel 173 10.3 Accounting for payments in the indirect channel 174 11 Repurchase agreements 177 Detailed contents 182 Index of examples 184 Guidance referenced in this publication 186 Acknowledgments 189 Keeping you informed 190
Facing the challenges The new revenue standard is having a profound effect across the telecommunications sector. The past two years have seen telecom companies wrestle with implementation issues. Every day brings new questions and new insights, which are – sometimes quite hotly – discussed and debated in various forums globally. We are helping our clients to navigate through this period and we’ve gained extensive experience applying the new revenue standard around the world. And we are delighted to share this experience with you in this publication. It builds on the discussions to provide preparers, users and auditors with a comprehensive and illustrated understanding of how to apply the new standard to common transactions. Whether you are just starting to assess the impact of the new requirements or are at an advanced stage with your implementation project, this publication will provide you with the insight that you need into the implementation issues that telecom companies are facing. With the effective date of 2018 rapidly approaching, time is running out. If you have yet to begin your implementation of the new requirements, we urge you to start as a matter of priority and to engage with investors and other stakeholders to build expectations of how your key performance indicators or business practices may change. Please speak to your usual KPMG contact if you are facing implementation challenges or would like to discuss any other accounting issues. Valerie Boissou Karyn Brooks Prabhakar Kalavacherla (PK) Allison McManus Jason Waldron © 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
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Revenue for Telecoms

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