Blue Label Telecoms Integrated Annual Report 2019

Blue Label annual financial statements 2019 125 12. 2018 ACCOUNTING POLICIES continued 12.1 Revenue continued Revenue recognition continued (a) Prepaid airtime, data and related revenue continued On receipt of a customer order, data vouchers are delivered in bulk in the form of a stock file via SFTP. The stock file contains the same information delivered to us by the networks, being PIN numbers, product codes, serial numbers and expiry dates. For physical airtime, virtual airtime and data vouchers, risks and rewards transfer to the customer on delivery of the physical stock or stock files to them. Blue Label acts as a principal and as such recognises the gross receipt as revenue. In addition to the above, Blue Label generates PINless revenue on prepaid airtime. Airtime is requested by an end user via one of our customer’s integrated systems, upon which we automatically notify the applicable network to increase the relevant end user balance. Blue Label does not take control of PINless stock at any point. As Blue Label does not take control of stock relating to PINless revenue, risks and rewards transfer from the network directly to the end user when its balance is increased. Revenue is recognised for the agency service at this point. In this scenario, Blue Label acts as an agent as it effectively collects amounts on behalf of the networks and therefore only recognises revenue to the extent of the commission earned. Incentives relating to these sales, based on contractual criteria, are recognised only once the associated criteria have been met. (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 mobile 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 mobile 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 The Group sells prepaid electricity to customers on behalf of the utility suppliers. Commissions on the sale of electricity are recognised by the Group when the end customer purchases the electricity voucher, as should the end user choose not to redeem their voucher the Group will still realise the economic benefit of the sale. 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 Included in this category is revenue earned from the sale of handsets, tablets and devices. Revenue from the sale of handsets, tablets and devices is recognised as a sale of a goods when the device is transferred to a customer. For this category of revenue the Group acts as principal. (g) Finance revenue Where the core business of a Group company is to provide finance to its customers, interest earned on the financing arrangement is recognised as revenue. Revenue from a financing arrangement is recognised over the term of the loan at the effective interest rate. For this category of revenue the Group acts as principal.