Revenue for Telecoms
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<strong>Revenue</strong> <strong>for</strong> <strong>Telecoms</strong> – Issues In-Depth | 53<br />
3.4 Telecom services |<br />
Optional services will usually be distinct but need to be evaluated <strong>for</strong><br />
potential material rights<br />
Telecom contracts often include optional features that can be purchased<br />
separately – e.g. adding minutes, texts or data to a fixed usage plan, additional<br />
bundles of voice, text and data to an existing plan, international roaming plans,<br />
additional television channels or pay-per-view movies.<br />
When these add-ons are subscribed to by the customer, either at contract<br />
inception or later in the contract, the entity needs to assess whether they are<br />
distinct from the other services. As described above, because these add-ons can<br />
be purchased separately and can often be opted in to or out of at any time during<br />
the contract, they are generally capable of being distinct (Criterion 1). Although<br />
the add-ons (e.g. an international wireless voice plan) are typically not offered to<br />
a customer that has not subscribed to a base service plan (e.g. a wireless voice<br />
plan), the add-ons do not generally trans<strong>for</strong>m the base service and there<strong>for</strong>e meet<br />
Criterion 2 (distinct in the context of the contract).<br />
When these add-ons are available to the customer but the customer has not yet<br />
subscribed to them, the telecom entity should consider the guidance on options<br />
and material rights (see Section 8).<br />
Share plans add complexity<br />
Share plans add complexity when identifying the per<strong>for</strong>mance obligations in<br />
a contract. Their specific facts and circumstances may vary and need to be<br />
analyzed carefully. In addition, share plans may be entered into through several<br />
contracts with different users. The telecom entity should there<strong>for</strong>e determine<br />
who its customer is, which may include assessing who is responsible <strong>for</strong><br />
payment. It should also consider the contract combination guidance (see 2.3).<br />
3.4.2 The series guidance applied to telecom services<br />
Telecom entities need to define the nature of their promise to the customer, which<br />
may be a promise to deliver time increments of network service (minute, day etc.)<br />
or other service units (text, data gigabyte etc.). In many cases, telecom services<br />
will meet the criteria to be accounted <strong>for</strong> as a series because each time increment<br />
or service unit is distinct, similar and delivered over time. If so, the telecom<br />
service is accounted <strong>for</strong> as one per<strong>for</strong>mance obligation. This may have follow-on<br />
consequences when determining the pattern of transfer (see 6.3) and accounting<br />
<strong>for</strong> contract modifications. The practical outcome of accounting <strong>for</strong> the services as a<br />
series is a simplified approach to what the new standard otherwise would require.<br />
Requirements of the new standard<br />
606-10-25-14b<br />
[IFRS 15.22(b)]<br />
A contract may contain promises to deliver a distinct series of goods or services<br />
that are substantially the same. At contract inception, an entity assesses the goods<br />
or services promised in the contract and determines whether the series is a single<br />
per<strong>for</strong>mance obligation. This is the case when it meets the following criteria.<br />
© 2016 KPMG LLP, a Delaware limited liability partnership and the US member firm of the KPMG network of<br />
independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.<br />
© 2016 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.<br />
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