Revenue – ifrs 15 handbook

 
Additional application examples
Example 3 – Telco: Purchased modem and router with internet
Telco T enters into a two-year contract for internet services with Customer C. 
C also buys a modem and a router from T and obtains title to the equipment. 
T does not require customers to purchase its modems and routers and 
will provide internet services to customers using other equipment that is 
compatible with T’s network. There is a secondary market in which modems and 
routers can be bought or sold for amounts greater than scrap value.
T concludes that the modem and router are each distinct and that the 
arrangement includes three performance obligations (the modem, the router 
and the internet services) based on the following evaluation.
Criterion 1
Capable of being distinct
– C can benefit from the modem and router on their own 
because they can be resold for more than scrap value.
– C can benefit from the internet services in conjunction 
with readily available resources – i.e. either the modem 
and router are already delivered at the time of contract set-
up, they could be bought from alternative retail vendors 
or the internet service could be used with different 
equipment.
Criterion 2
Distinct within the context of the contract
– T does not provide a significant integration service.
– The modem, router and internet services do not modify or 
customise one another.
– C could benefit from the internet services using routers 
and modems that are not sold by T. Therefore, the modem, 
router and internet services are not highly dependent on or 
highly inter-related with each other.
Example 4 – Telco: Wi-Fi hotspot access
Telco T offers a premium internet package that includes, among other services, 
access to Wi-Fi hotspots. Alternatively, T offers a basic internet package 
that allows, for an additional fee, the same access to Wi-Fi hotspots as the 
premium package.

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32 | Revenue – IFRS 15 handbook
T determines that the access to the Wi-Fi hotspots is distinct from the other 
network services. This is because customers can benefit from the Wi-Fi hotspot 
access on its own (i.e. it is sold separately). Furthermore, this service is distinct 
within the context of the contract because the Wi-Fi hotspot access is not highly 
inter-related with the network services. This is because the customer could 
choose not to take Wi-Fi hotspot access and the network services would not be 
significantly affected.