IFRS 15 New Revenue Model: Spotlight on Telecommunications

Telecoms companies have a variety of product offerings to customers. Many arrangements have multiple goods or services with options given to customers. The nature of such offerings requires careful evaluation under IFRS 15 (The new revenue recognition standard).

Some of the impact areas include:

How revenue should be allocated to different goods and services identified (e.g. mobile handsets)

Previously given the lack of specific guidance in IFRSs, there was greater room for judgments when identifying the goods or services within a contract and then allocating the revenue to those goods and services. The new standard requires the revenue from a contract to be allocated to each distinct goods or service provided on a relative standalone selling price basis though a residual approach is permitted in limited circumstances.

Within the telecoms industry, it is common for handsets to be subsidised by the providers of airtime and to be viewed as a cost of doing business. Previously, any revenue allocated to the handset has often been limited to the amount, if any, explicitly paid by the customer towards the handset. With IFRS 15, the Company will recognise more revenue (at the delivery of the handset) and less as the contract continues whether or not this is reflected in billing.


Certain arrangements in the telecoms industry, such as wireless contracts, may contain options (e.g., to renew for an additional term or receive additional services). With IFRS 15, an option given to a customer to acquire additional goods or services represents a performance obligation if it provides a “material right” to the customer that it otherwise would not have received without entering into the contract (e.g., “a discount that is incremental to the range of discounts typically given for those goods or services to
that class of customer in that geographical area or market”). If an option is deemed a performance obligation, the Company must allocate a portion of the transaction price to the option and recognise revenue when control of the goods or services underlying the option is transferred to the customer or when the option expires.

The impact areas discussed above is not exhaustive. Telecoms companies require a deeper assessment of the impact IFRS 15 will have on their revenue and cost model. With adoption year approaching fast, there is just but a little time left to reassess and make the right systems and technology changes to accommodate the impact.

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