Founded in 1987, Huawei is a leading global provider of information and communications

(i) Revenue from customer contracts
The Group divides its business into three 
operating segments, Carrier Business, 
Enterprise Business and Consumer Business. 
The principal activities of each segment are 
disclosed in note 7.
The Group applies its revenue accounting 
policies based on the features of the contracts 
and the business practices of its business 
groups.
Revenue is measured based on the 
consideration the Group expects to be entitled 
to from the contract with the customer and 
excludes those amounts collected on behalf 
of third parties. The Group recognises revenue 
when it transfers control over a product or 
service (or bundle) to a customer.
i.  Contract combinations and modifications
The Group combines separate customer 
contracts with the same customer or 
related parties of the same customers 
entered into at or near the same time 
when those contracts are negotiated as 
a package to form a single commercial 
objective, are significantly interdependent 
in nature or contain significant pricing 
dependencies.
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 assurance in nature and are 
accounted for as a warranty provision at 
the time of the sale (see note 3(o)).

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Huawei Investment & Holding Co., Ltd.
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.
v.  Variable consideration
Revenue 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 component
In 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 component in 
determining the transaction price only 
when the payment terms exceed one year 
in duration between performance and 
payment.

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2020 Annual Report
 
       
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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 
Customers
 (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.
viii. Contract assets and liabilities
When revenue is recognised under a 
contract with a customer before the Group 
becomes unconditionally entitled to the 
consideration under the relevant payment 
terms of the contract, a contract asset is 
recognised. Contract assets are reclassified 
to trade receivables when the right to 
consideration becomes unconditional.
When consideration is received (or the 
right to consideration is unconditional) 
before the related revenue is recognised, a 
contract liability is recognised.
For a single contract with the customer, 
either a net contract asset or a net contract 
liability is presented. For multiple contracts, 
contract assets and contract liabilities of 
unrelated contracts are not presented on a 
net basis.
Trade receivables are recognised when the 
right to consideration under a revenue 
contract becomes unconditional, regardless 
of the billing date.
ix.  Refund liabilities
A refund liability, such as the accrued 
rebates to customers and other sales-based 
incentives granted, is recognised when 
the Group receives consideration from the 
customer and expects to refund some or 
all of that consideration to the customer. 
Refund liabilities are presented in Other 
liabilities in the consolidated statement of 
financial position.

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Huawei Investment & Holding Co., Ltd.
x.  Contract costs
Certain incremental acquisition costs 
(those paid to acquire a contract such as 
commission) and fulfilment costs (those 
incurred to deliver services to customers) 
are initially capitalised to the extent that 
the costs are recoverable, and subsequently 
recognised as expense over the period of 
expected benefit, which is generally the 
associated contract duration.
Incremental acquisition costs incurred in its 
major businesses are minimal and generally 
expensed immediately.
The Group recognises a contract cost 
impairment when the carrying amount 
of unamortised contract costs exceeds 
the difference between the remaining 
consideration expected to recover and the 
associated costs relating to providing those 
goods and services under the contract.