2019 Annual Report (^105)
Contract modifications are generally
treated either as a new separate contract,
or as a prospective change to an existing
contract. In cases when the additional
or the remaining goods and services are
not distinct from those transferred before
the date of modification, typically in the
Carrier Business and Enterprise Business,
modifications are accounted for through a
cumulative catch-up adjustment.
ii. Performance Obligations (POB)
In the Consumer Business, POBs are
typically terminal devices, accessories and
services. In the Carrier Business, there are
generally more POBs due to the nature of
the contracts which typically involve sales
of networking hardware, software and a
wide range of services. In the Enterprise
Business where the Group delivers bespoke
end-to-end solutions, there may in some
cases only be a few POBs.
iii. Warranties
In the Carrier Business and Enterprise
Business, customer service warranties,
except for those related to certain
Enterprise products, are generally
recognised as a distinct service for which
revenue is allocated and recognised
over the service period. In the Consumer
Business, warranties provided on terminal
devices and accessories are generally
standard and assurance in nature and are
accounted for as a warranty provision at
the time of the sale (see note 3(p)).
iv. Timing of revenue recognition
The Group determines at contract inception
whether it transfers the control of a
good or service underlying a POB to the
customer over time or at a point in time.
A POB is satisfied and related revenue
is recognised over time, if one of the
following criteria is met:
■ The customer simultaneously receives
and consumes the benefits provided by
the Group’s performance as the Group
performs;
■ The Group’s performance creates or
enhances an asset that the customer
controls as the asset is created or
enhanced; or
■ The Group’s performance does not
create an asset with an alternative
use to the Group and the Group has
an enforceable right to payment for
performance completed to date.
If a POB is not satisfied and the control
over the related good or service is not
transferred over time in accordance with
the above criteria, it is satisfied and
revenue is recognised at a point in time.
Most Carrier Business contracts include
multiple POBs for which revenue is
recognised when the Group transfers
control of each obligation, either at a point
in time such as delivery or acceptance,
or over time as the obligation is being
fulfilled or the customer obtains control of
the goods and/or services. Some Carrier
Business construction contracts represent a
single or a few POBs for which revenue is
recognised over the delivery period.
Within the Enterprise Business certain
solution build contracts constitute a single
or a small number of POBs for which
revenue is recognised over the delivery
period. For the remaining contracts with
multiple POBs, revenue is recognised as and
when control related to each obligation is
transferred, either at a point in time, such
as delivery or acceptance, or over time,
as the obligation is being fulfilled and the
customer obtains control of the goods and/
or services.
Sales of terminal devices and accessories
by the Consumer Business to distribution
channels are recognised when control of
the goods has transferred. In most cases,
this is when the sell-in to the channel
occurs; however, in a limited number of
cases, this is when the goods are sold to
the second tier distribution channels or
end-users.
coco
(coco)
#1