Revenue for Telecoms

More documents

Recommendations

Info

46 | Revenue for Telecoms – Issues In-Depth | 3 Step 2: Identify the performance obligations in the contract Comparison with current US GAAP Benefit to the customer versus stand-alone value 605-25-25-5 For a promised good or service to be distinct under the new standard, it has to be: – capable of being distinct (Criterion 1); and – distinct within the context of the contract (Criterion 2). Criterion 1 (capable of being distinct) is similar, but not identical, to the standalone value criterion required under current US GAAP. Specifically, under current US GAAP a delivered item has value on a stand-alone basis if it is sold separately by any entity or if the customer could resell the delivered item on a stand-alone basis (even in a hypothetical market). Under the new standard, an entity evaluates whether the customer can benefit from the good or service on its own or together with other readily available resources. This evaluation no longer depends entirely on whether the entity or another entity sells an identical or largely interchangeable good or service separately, or whether the delivered item can be resold by the customer. Rather, in evaluating whether the customer can benefit from the good or service on its own, an entity determines whether the good or service is sold separately (by the entity or another entity) or could be resold for more than scrap value. An entity also considers factors such as a product’s stand-alone functional utility. Therefore, potentially more goods may qualify as distinct under Criterion 1 than under current US GAAP. However, an entity also has to evaluate Criterion 2. Promised goods or services versus deliverables There may not be an exact correlation in all cases between what is considered a ’deliverable’ under current US GAAP and what is considered a ‘promised good or service’ under the new standard. The term ’deliverable’ is not defined in current US GAAP. However, in a 2007 speech 3 ,the SEC staff noted that the following criteria are a helpful starting point in determining whether an item is a deliverable: – the item is explicitly referred to as an obligation of the entity in a contractual arrangement; – the item requires a distinct action by the entity; – if the item is not completed, then the entity will incur a significant contractual penalty; or – inclusion or exclusion of the item from the arrangement will cause the arrangement fee to vary by more than an insignificant amount. Under the new standard, promised goods or services are the promised obligations within the contract, which are considered as part of the analysis in Step 1 (see Section 2) and Step 2 (see Section 3). 3. SEC Speech, “Remarks Before the 2007 AICPA National Conference on Current SEC and PCAOB Developments,” by Mark Barrysmith, Professional Accounting Fellow at the SEC, available at www.sec.gov. 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 | 47 3.3 Telecom equipment | 3.3 Telecom equipment Consumer and business telecom contracts often include equipment that is provided to the customer. The first step in assessing the accounting for the equipment is to determine whether it is the subject of a lease (see 1.3). When the equipment is not the subject of a lease, the entity assesses whether it is a promised good or service and, if so, if it is distinct from the other goods or services in the contract by applying the criteria in 3.2. Judgment may be required. If the equipment does not transfer to the customer, then the entity considers whether the costs can be capitalized as an asset or as a fulfillment cost (see Section 7). Example 16 – Wireless contract with handset Telco T has a contract with Customer R that includes the delivery of a handset and 24 months of voice and data services. Customer R obtains title to the handset. The handset can be used by Customer R to perform certain functions – e.g. calendar, contacts list, email, internet access, accessing apps via Wi-Fi, and to play music or games. There is evidence of customers reselling the handset on an online auction site and recapturing a portion of the selling price of the handset. Telco T regularly sells its voice and data services separately to customers, through renewals or sales to customers who acquire their handset from an alternative vendor – e.g. a retailer. Telco T concludes that the handset and the wireless services are two separate performance obligations based on the following evaluation. Criterion 1 Capable of being distinct – Customer R can benefit from the handset either on its own – i.e. because the handset can be resold for more than scrap value and has substantive, although diminished, functionality that is separate from Telco T’s network – or together with its wireless services that are readily available to Customer R, because Telco T sells those services separately. – Customer R can benefit from the wireless services in conjunction with readily available resources – i.e. either the handset is already delivered at the time of contract set-up, or could be purchased from alternative retail vendors or the wireless service could be used with a different handset. © 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 47: Revenue for Telecoms - Issues In-De
Page 99 and 100:
Revenue for Telecoms - Issues In-De
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:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
show all

Revenue for Telecoms

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?