TDC Group Annual Report 2011(6,4MB) - TDC Annual Report 2011

of a hedged item for which the effective interest method is
used is amortised to profit or loss over the period to
maturity.
Changes in the fair values of derivative financial
instruments that qualify as net investment hedges in
foreign subsidiaries, joint ventures or associates, and that
effectively hedge exchange rate changes in these
enterprises, are recognised directly in Other comprehensive
income net of tax.
Fair value changes of derivative financial instruments that
do not qualify for hedge accounting are recognised
immediately in the Income Statements. This also applies for
any gain or loss relating to the ineffective portion of cash
flow, fair value and net investment hedges.
Revenue recognition
Revenue comprises goods and services provided during the
year after deduction of VAT and rebates relating directly to
sales. Services include traffic and subscription fees,
interconnect and roaming fees, fees for leased lines, network
services, TV distribution as well as connection and installation
fees. Goods include customer premises equipment, telephony
handsets, PCs, set-top boxes, etc.
The significant sources of revenue are recognised in the
Income Statements as follows:
• Revenues from telephony are recognised at the time the
call is made
• Sales related to prepaid products are deferred, and
revenues are recognised at the time of use
• Revenues from leased lines are recognised over the
rental period
• Revenues from subscription fees and flat-rate services
are recognised over the subscription period
• Revenues from non-refundable up-front connection fees
are deferred and amortised over the expected term of the
related customer relationship
• Revenues from the sale of equipment are recognised
upon delivery. Revenues from the maintenance of
equipment are recognised over the contract period.
Revenue arrangements with multiple deliverables are
recognised as separate units of accounting, independent of
any contingent element related to the delivery of additional
TDC Group Annual Report 2011
items or other performance conditions. Such revenues
include sale of customer-placed equipment, e.g.
switchboards and handsets.
Sales of handsets below cost in an arrangement, which
cannot be separated from the provision of services, are not
recognised as revenue.
Revenues are recognised gross when TDC acts as a
principal in a transaction. For content-based services and
the resale of services from content providers where TDC
acts as agent, revenues are recognised net of direct costs.
The percentage of completion method is used to recognise
revenue from contract work in progress based on an
assessment of the stage of completion. Contract work in
progress includes installation of telephone and IT systems,
system integration and other business solutions.
External expenses
Subscriber acquisition and retention costs are expensed as
incurred. The most common subscriber acquisition costs
are handsets and dealer commissions. The cost of a
handset is expensed when the handset is sold. The sale
could be an individual sale or a multiple-element sale with a
subscription.
Share-based remuneration
The value of services received from employees in return for
share-based instruments is measured at the grant date at
the fair value of the instruments granted and is recognised
over the vesting period in the Income Statements under
wages, salaries and pension costs. The set-off item is
recognised directly in equity.
For initial recognition of share-based remuneration, the
number of instruments to which employees are expected to
be entitled is based on an estimate. Changes in the estimated
number of legally acquired instruments are subsequently
adjusted so that the total recognition is based on the actual
number of legally acquired instruments.
Employee shares
When employees are granted shares for free or given the
opportunity of purchasing shares at a price below market
price, the discount is recognised as a cost under wages,
salaries and pension costs at the time of grant. The set-off
item is recognised directly in equity. The discount is
measured at the time of grant as the difference between fair
value and purchase price.
107