106 Huawei Investment & Holding Co., Ltd.
v. Variable considerationRevenue is measured at the fair value of
the consideration received or receivable,
adjusted at contract inception for penalties,
price concessions, returns, trade discounts,
volume rebates and other sales incentives,
such as coupons, provided that the level of
expected return of goods, volume rebates
and other incentives given can be estimated
reliably and that revenue is only recognised
to the extent that it is highly probable
that a significant reversal in the amount
of cumulative revenue recognised will
not occur. When making an estimate for
variable consideration, the Group considers
several factors, including but not limited to,
contract commitments, business practices,
historical experience, customer take-up
rates, and expected purchase volumes.vi. Significant financing componentIn the Carrier Business and Enterprise
Business, payments are generally received
according to the payment milestones set
out in the contracts before or after the
obligations are fulfilled, usually including
advance payments, delivery payments and
completion payments. In the Consumer
Business and certain business units under
the Enterprise Business, advance payments
are commonly received. Advance payments
are usually received less than one year
ahead of satisfaction of a performance
obligation.The amount of consideration in a sales
contract is adjusted for the existence of
significant financing in determining the
transaction price only when the payment
terms exceed one year in duration between
performance and payment.The Group recognises interest income
where payment is received more than
one year in arrears of satisfaction of
a performance obligation, reflecting a
deemed lending of cash to a customer.
Such interest income is presented in finance
income. The consideration attributable to
other goods and services in the contract is
reduced by a corresponding amount and is
included within revenue.The Group adopts the practical expedient
under IFRS 15, Revenue from Contracts with
Customer (IFRS 15), and does not account
for the significant financing components
where the Group anticipates at contract
inception that the timing difference
between transfer of control of a good or
service to a customer, and the customer
paying for that good or service will be one
year or less.vii. Stand-alone selling prices (SSP)The transaction price of a contract with
a customer is allocated to each POB in
proportion to its SSP. The Carrier Business
and Enterprise Business primarily use
estimated SSP and the Consumer Business
uses directly observable SSP.Within the Carrier Business and the
Enterprise Business, the Group establishes
the SSP for products mainly using an
average price approach by product
category. Average price of a product is
calculated with reference to the historical
stand-alone product sale transactions for
the product and the product category is
determined with reference to the product
family and geographical region.For services that are regularly sold on a
stand-alone basis, most of such services are
customised and priced on a project basis,
therefore the transaction prices generally
reflect the SSP. For the services where an
observable transaction price is unavailable
such as the services sold in a bundle with
products, the Group determines the SSP
using a cost-plus approach, taking into
account several factors, including but not
limited to labour cost, competition and
company business strategy.When a significant discount is granted and
is specifically attributable to one or more
POBs that discount is allocated to the
identified POB(s) if the allocation reflects
the Group’s regular sales pattern. In all
other cases the discount is allocated to the
contract overall.