Revenue for Telecoms
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<strong>Revenue</strong> <strong>for</strong> <strong>Telecoms</strong> – Issues In-Depth | 59<br />
3.6 Other telecom services, fees and administrative tasks |<br />
Comparison with current US GAAP<br />
Hookup revenue guidance <strong>for</strong> cable/satellite entities is superseded<br />
922-430-25-1, 35-1, 922-605-25-3 Under current guidance <strong>for</strong> cable television providers, hookup revenue (i.e. fees<br />
that customers pay <strong>for</strong> the installation/set-up of their cable/satellite television<br />
services) is recognized up front to the extent of direct selling costs, with the<br />
remainder deferred over the expected customer relationship period. This<br />
guidance will be withdrawn when the new standard becomes effective. However,<br />
some of the guidance on costs <strong>for</strong> cable companies has not been withdrawn (see<br />
Section 7).<br />
There is no industry-specific revenue recognition guidance under the new<br />
standard. There<strong>for</strong>e, whether a portion of any up-front fee <strong>for</strong> an installation<br />
will be recognized at contract inception under the new standard depends on<br />
the specific facts and whether the installation activities meet the definition of a<br />
per<strong>for</strong>mance obligation.<br />
3.6 Other telecom services, fees and administrative<br />
tasks<br />
Requirements of the new standard<br />
606-10-25-16 – 25-17<br />
[IFRS 15.24–25]<br />
Promises to transfer a good or service can be explicitly stated in the contract, or be<br />
implicit based on established business practices or published policies that create a<br />
valid (‘reasonable’ under US GAAP) expectation that the entity will transfer the good<br />
or service to the customer.<br />
Conversely, administrative tasks do not transfer a good or service to the customer and<br />
are not per<strong>for</strong>mance obligations – e.g. administrative tasks to set up a contract.<br />
Example 25 – Activation fee in a wireless contract<br />
Telco A charges a one-time activation fee of 25 to Customer C when Customer C<br />
enters into a wireless contract <strong>for</strong> a voice and data plan. The activation of a new<br />
wireless customer to the network requires various administrative tasks, including<br />
setting up the wireless service, processing a new customer in the billing system,<br />
and credit checks.<br />
Telco A determines that activation activities are administrative in nature and<br />
there<strong>for</strong>e do not constitute a separate promise to the customer to be assessed<br />
as a separate per<strong>for</strong>mance obligation. Because the activation fee is charged<br />
at contract inception and is not refundable, Telco A applies the guidance on<br />
nonrefundable up-front fees (see Section 9).<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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