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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
90
1.
Results of operations
continued
1.2 Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in
the ordinary course of the Group’s activities. Revenue is shown net of indirect taxes, estimated returns, rebates and
discounts, and after eliminated sales within the Group.
Revenue from the sale of goods is recognised when:
•
the Group has transferred to the customer the risks and rewards of ownership of the goods; and
•
the Group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold; and
•
the amount of revenue, and associated costs incurred or to be incurred, can be measured reliably; and
•
it is probable that the economic benefits associated with a transaction will flow to the Group.
Revenue from the rendering of a service is recognised when:
•
the amount of revenue, and associated costs incurred or to be incurred, can be measured reliably; and
•
it is probable that the economic benefits associated with a transaction will flow to the Group; and
•
the stage of completion of the transaction at the end of the reporting period can be measured reliably.
The main categories of revenue are as follows:
(a) Prepaid airtime, data and related revenue
Sales of prepaid airtime and data are recognised when the Group sells airtime and data to the customer. Incentives
relating to these sales, based on contractual criteria, are recognised only once the associated criteria have been met.
For this category of revenue the Group will act as either a principal or an agent.
(b) Postpaid airtime, data and related revenue
Sales of postpaid airtime and data are recognised on airtime and data contracted to be delivered to customers for
a period of time and billed on a monthly basis in arrears. Incentives relating to these sales, based on contractual
criteria, are recognised only once the associated criteria have been met. For this category of revenue the Group
will act as either a principal or an agent.
(c) Prepaid and postpaid SIM cards
Revenue is recognised when a SIM card is initially sold to the customer. Activation bonuses received from the
networks are recognised when the SIM card is activated on the relevant cellular network. Ongoing revenue and
other incentives are recognised once the associated contractual criteria have been met. The point of activation is
determined by the relevant cellular networks. For this category of revenue the Group acts as a principal.
(d) Sales of services
Sales of services are recognised in the accounting period in which the services are rendered, by reference to completion
of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be
provided. These services include location-based services, SMS transaction services, media, call centre and data transaction
revenue, and technology revenue. For this category of revenue the Group will act as either a principal or an agent.
(e) Electricity commission
Commissions on the sale of prepaid electricity are recognised when the Group sells electricity to the customer on
behalf of the utility suppliers. Commissions are recorded based on agreed rates per the contracts. For this category
of revenue the Group acts as an agent.
(f) Sales of handsets, tablets and other devices
Revenue is recognised when the handset, tablet or device is sold to the customer. For this category of revenue the
Group acts as a principal.
Critical accounting estimates and assumptions
Significant judgements are made by management when concluding whether the Group is transacting as an agent
or a principal. The assessment is performed for each separate revenue stream in the Group. The assessment requires
an analysis of key indicators, specifically whether the Group:
•
carries any inventory risk;
•
has the primary responsibility for providing the goods or services to the customer;
•
has the latitude to establish pricing; and
•
bears the customer’s credit risk.
These indicators are used to determine whether the Group has exposure to the significant risks and rewards
associated with the sale of goods or rendering of services. For example, any sale relating to inventory that is held
by the Group, not on consignment, is a strong indicator that the Group is acting as a principal.
Where the Group acts in its capacity as principal for the sale of goods or the rendering of services, as it does in the
sale of physical prepaid airtime and the sale of handsets, revenue is recognised as the fair value of the consideration
receivable net of discounts and taxes. Where the Group acts in its capacity as an agent, as it does in the sale of
electricity and PINless airtime, the amount of revenue recorded is the fair value of commission received or receivable.