Session 5 SM 3 Revenues – Accounting policies
L’Oreal
Net sales
Net sales are recognised when the risks and rewards inherent to ownership of
the goods have been transferred to the customer.
Sales incentives, cash discounts and product returns are deducted from sales,
as are incentives granted to distributors or consumers resulting in a cash
outflow, such as commercial cooperation, coupons, discounts and loyalty
programmes.
Sales incentives, cash discounts, provisions for returns and incentives
granted to customers are recorded simultaneously to the recognition of the
sales if they can be estimated in a reasonably reliable manner,based mainly
on statistics compiled from past experience and contractual conditions.
Shell
Revenue recognition
Revenue from sales of oil, natural gas, chemicals and other products is
recognised at the fair value of consideration received or receivable, after
deducting sales taxes, excise duties and similar levies, when the significant
risks and rewards of ownership have been transferred, which is when title
passes to the customer. For sales by Upstream operations, this generally
occurs when product is physically transferred into a vessel, pipe or other
delivery mechanism; for sales by refining operations, it is either when product
is placed onboard a vessel or offloaded from the vessel, depending on the
contractually agreed terms; and for wholesale sales of oil products and
chemicals it is either at the point of delivery or the point of receipt, depending
on contractual conditions.
Revenue resulting from the production of oil and natural gas from properties in
which Shell has an interest with partners in joint arrangements is recognised
on the basis of Shell’s working interest (entitlement method). Revenue
resulting from the production of oil and natural gas under production-sharing
contracts is recognised for those amounts relating to Shell’s cost recoveries
and Shell’s share of the remaining production. Gains and losses on derivative
contracts and the revenue and costs associated with other contracts that are
classified as held for trading purposes are reported on a net basis in the
Consolidated Statement of Income. Purchases and sales of hydrocarbons
under exchange contracts that are necessary to obtain or reposition feedstock
for refinery operations are presented net in the Consolidated Statement of
Income.
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ENI
Revenues and costs
Revenues associated with sales of products and services are recognized
when significant risks and rewards of ownership have passed to the customer
or when the transaction can be considered settled and the associated
revenue can be reliably measured. In particular, revenues are recognized for
the sale of:
• crude oil, generally upon shipment; • natural gas, upon delivery to the
customer;
• petroleum products sold to retail distribution networks, generally
upon delivery to the service stations, whereas all other sales of petroleum
products are generally recognized upon shipment; and
• chemical products
and other products, generally upon shipment.
Revenues are recognized upon shipment when, at that date, significant risks
are transferred to the buyer. Revenues from crude oil and natural gas
production from properties in which Eni has an interest together with other
producers are recognized on the basis of Eni’s net working interest in those
properties (entitlement method). Differences between Eni’s net working
interest volume and actual production volumes are recognized at current
prices at year end. Revenues related to partially rendered services are
recognized by reference to the stage of completion, provided that: (i) the
amount of revenues can be measured reliably; (ii) it is probable that the
economic benefits associated with the transaction will flow to the entity; (iii)
the stage of completion of the transaction at the end of the reporting period
can be measured reliably; and (iv) the related costs can be measured reliably.
When the outcome of the transaction involving the rendering of services
cannot be estimated reliably, revenue is recognized only to the extent of the
expenses recognized that are recoverable. Revenues accrued during the year
related to construction contracts are recognized on the basis of contractual
revenues with reference to the stage of completion of a contract measured on
the cost-to-cost basis. For service concession arrangements (see item
"Intangible assets" above) in which customers fees do not provide a reliable
distinction between the compensation for construction/update of the
infrastructure and the compensation for operating it and in the absence of
external benchmarks, revenues recognized during the construction/update
phase are limited to the amount of the costs incurred. Additional revenues,
derived from a change in the scope of work, are included in the total amount
of revenues when it is probable that the customer will approve the variation
and the related amount. Claims deriving from additional costs incurred for
reasons attributable to the customer are included in the total amount of
revenues when it is probable that the counterparty will accept them. Tangible
assets, different from an infrastructure used in service concession
arrangements, transferred from customers (or constructed using cash
transferred from customers) and used to connect them to a network to supply
goods and services, are recognized at their fair value as an offset to revenues.
When more than one separately identifiable service is provided (for example,
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connection to a network and supply of goods) the entity shall assess for which
one service it receives the transferred asset from the customer and it shall
consistently recognize a revenue when the connection is delivered or over the
lesser period between the length of the supply and the useful life of the
transferred asset. Revenues are measured at the fair value of the
consideration received or receivable net of returns, discounts, rebates,
bonuses and related taxation. Award credits, related to customer loyalty
programs, are recognized as a separate component of the sales transaction
which grants the right to customers. Therefore, the portion of revenues related
to the fair value of award credits granted is recognized as an offset to the item
"Other liabilities". The liability is charged to the profit and loss account in the
period in which the award credits are redeemed by customers or the related
right is lost. The exchange of goods and services of a similar nature and value
do not give rise to revenues and costs as they do not represent sale
transactions. Costs are recognized when the related goods and services are
sold or consumed during the year, they are systematically allocated or when
their future economic benefits cannot be identified. Costs associated with
emission quotas, determined on the basis of the market prices, are
recognized in relation to the amount of the carbon dioxide emissions that
exceed free allowances. Costs related to the purchase of the emission rights
are recognized as intangible assets net of any negative difference between
the amount of emissions and the free allowances. Revenues related to
emission quotas are recognized when they are sold. In case of sale, if
applicable, the acquired emission rights are considered as the first to be sold.
Monetary receivables granted as a substitution of emission rights awarded
free of charge are recognized as a contra to item "Other income and
revenues" of the profit and loss account. Operating lease payments are
recognized in the profit and loss account over the length of the contract.
Payroll costs include stock options granted to managers, consistent with their
actual remunerative nature. The instruments granted are recorded at fair
value on the vesting date and are not subject to subsequent adjustments; the
current portion is calculated pro-rata over the vesting period17. The fair value
of stock options is determined using valuation techniques which consider
conditions related to the exercise of options, current share prices, expected
volatility and the risk-free interest rate. The fair value of stock options is
recognized as a contra to the equity item "Other reserves". The costs for the
acquisition of new knowledge or discoveries, the study of products or
alternative processes, new techniques or models, the planning and
construction of prototypes or, in any case, costs incurred for other scientific
research activities or technological development, which cannot be capitalized
(see item "Intangible assets" above), are included in the profit and loss
account when they are incurred.
H&M
Income
The Group’s income is generated mainly by the sale of clothing and cosmetics
to consumers. Sales revenue is reported less value-added tax, returns and
discounts as sales excluding VAT in the income statement. Income is
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reported in conjunction with sale/delivery to the customer. Franchise sales
have two components: sales of goods to franchisees, which are reported on
delivery of the goods, and franchise fees, which are reported when the
franchisee sells goods to the consumer. The Group’s income exhibits
seasonal variations. The first quarter of the financial year is normally the
weakest and the last quarter the strong- est. Interest income is reported as it
is earned.
VW
REVENUE AND EXPENSE RECOGNITION
Sales revenue, interest and commission income from financial services and
other operating income are recognized only when the relevant service has
been rendered or the goods have been delivered, that is, when the risk has
passed to the customer, the amount of sales revenue can be reliably
determined and settlement of the amount can be assumed. Revenue is
reported net of sales allowances (discounts, rebates, or customer bonuses).
Sales revenue from financing and lease agreements is recognized using the
effective interest method. If non-interest-bearing or low-interest vehicle
financing arrangements are agreed, sales revenue is reduced by the interest
benefits granted. Revenue from operating leases is recognized using the
straight-line method over the term of the lease. Sales revenue from extended
warranties or maintenance agreements is recognized when deliveries take
place or services are rendered. In the case of prepayments, deferred income
is recognized proportionately by reference to the costs expected to be
incurred, based on experience. Revenue is recognized on a straight-line basis
if there is insufficient experience. If the expected costs exceed the accrued
sales revenue, a loss is recognized from these agreements.
If a contract comprises several separately identifiable components (multipleelement arrangements), these components are recognized separately in
accordance with the principles outlined above.
Income from assets for which a Group company has a buy back obligation is
recognized only when the assets have definitively left the Group. If a fixed
repurchase price was agreed when the contract was entered into, the
difference between the selling and repurchase price is recognized as income
ratably over the term of the contract. Prior to that time, the assets are carried
as inventories in the case of short contract terms and as leasing and rental
assets in the case of long contract terms.
Cost of sales includes the costs incurred to generate the sales revenue and
the cost of goods purchased for resale. This item also includes the costs of
additions to warranty provisions. Research and development costs not eligible
for capitalization in the period and amortization of development costs are
likewise carried under cost of sales. Reflecting the presentation of interest and
commission income in sales revenue, the interest and commission expenses
attributable to the financial services business are presented in cost of sales.
Construction contracts are recognized using the percentage of completion
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(PoC) method, under which revenue and cost of sales are recognized by
reference to the stage of completion at the end of the reporting period, based
on the contract revenue agreed with the customer and the expected contract
costs. As a rule, the stage of completion is determined as the proportion that
contract costs incurred by the end of the reporting period bear to the
estimated total contract costs (cost-to- cost method). In certain cases, in
particular those involving innovative, complex contracts, the stage of
completion is measured using contractually agreed milestones (milestone
method). If the outcome of a construction contract cannot yet be estimated
reliably, contract revenue is recognized only in the amount of the contract
costs incurred to date (zero profit method). In the balance sheet, contract
components whose revenue is recognized using the percentage of completion
method are reported as trade receivables, net of prepayments received.
Expected losses from construction contracts are recognized immediately in
full as expenses by recognizing impairment losses on recognized contract
assets, and additionally by recognizing provisions for amounts in excess of
the impairment losses.
Dividend income is recognized on the date when the dividend is legally
approved.
BMW
Revenues from the sale of products are recognised when the risks and
rewards of ownership of the goods are transferred to the dealer or customer,
provided that the amount of revenue can be measured reliably, it is probable
that the economic benefits associated with the transaction will flow to the
entity and costs incurred or to be incurred in respect of the sale can be
measured reliably. Revenues are stated net of settlement discount, bonuses
and rebates. Revenues also include lease rentals and interest income earned
in conjunction with finan- cial services. Revenues from leasing instalments
relate to operating leases and are recognised in the income statement on a
straight line basis over the relevant term of the lease. Interest income from
finance leases and from customer and dealer financing are recognised using
the effective interest method and reported as revenues within the line item
“Interest income on loan financing”. If the sale of products includes a
determinable amount for subsequent services (multiple-component contracts),
the related revenues are deferred and recognised as income over the relevant
service period. Amounts are normally recognised as income by reference to
the pat- tern of related expenditure.
Profits arising on the sale of vehicles for which a Group company retains a
repurchase commitment (buy-back contracts) are not recognised until such
profits have been realised. The vehicles are included in inventories and stated
at cost.
Siemens
Revenue recognition – Under the condition that persuasive evidence of an
arrangement exists revenue is recognized to the extent that it is probable that
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the economic benefits will flow to the Company and the revenue can be
reliably measured, regardless of when the payment is being made. In cases
where the inflow of economic benefits is not probable due to customer related
credit risks the revenue recognized is subject to the amount of payments
irrevocably received. Revenue is measured at the fair value of the
consideration received or receivable net of discounts and rebates and
excluding taxes or duty. The Company assesses its revenue arrangements
against specific criteria in order to determine if it is acting as principal or agent.
The following specific recognition criteria must also be met before revenue is
recognized:
Sale of goods: Revenue from the sale of goods is recognized when the
significant risks and rewards of ownership of the goods have passed to the
buyer, usually on delivery of the goods.
Sales from construction contracts: A construction contract is a contract
specifically negotiated for the construction of an asset or a combination of
assets that are closely interrelated or inter- dependent in terms of their design,
technology and function or their ultimate purpose or use. When the outcome
of a construction contract can be estimated reliably, revenues from
construction-type projects are recognized under the percent- age-ofcompletion method, based on the percentage of costs to date compared to
the total estimated contract costs. An expected loss on the construction
contract is recognized as an expense immediately. When the outcome of a
construction contract cannot be estimated reliably (1) revenue is recognized
only to the extent contract costs incurred are probable of being recoverable,
and (2) contract costs are recognized as an expense in the period in which
they are incurred.
During project execution, variation orders by the customer for a change in the
scope of the work to be performed under the contract may be received
leading to an increase or a decrease in contract revenue. Examples of such
variations are changes in the specifications or design of the asset and
changes in the duration of the contract. As the scope of work to be performed
changes also in case of contract terminations, such terminations are
considered to be a subset of variations. Therefore the requirements of IAS 11
relating to variations are applied to con- tract terminations, irrespective of
whether the contract is terminated by the customer, Siemens or both. In
accordance with the requirements of IAS 11 relating to changes in estimates,
the estimates of the total contract revenue and the total con- tract costs are
adjusted reflecting the reduced scope of work to be performed, typically
leading to a reversal of revenue recognized. This methodology is also applied
to contracts for which it is management’s best estimate that a termination is
the most likely scenario, but which have not yet been terminated.
Rendering of services: Revenues from service transactions are recognized as
services are performed. For long-term service contracts, revenues are
recognized on a straight-line basis over the term of the contract or, if the
performance pattern is other than straight-line, as the services are provided,
i.e. under the percentage-of-completion method as described above.
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Sales from multiple element arrangements: Sales of goods and services as
well as software arrangements sometimes involve the provision of multiple
elements. In these cases, the Company determines whether the contract or
arrangement contains more than one unit of accounting. If certain criteria are
met, foremost if the delivered element(s) has (have) value to the customer on
a stand-alone basis, the arrangement is separated and the appropriate
revenue recognition convention is then applied to each separate unit of
accounting. Generally, the
total arrangement consideration is allocated to the separate units of
accounting based on their relative fair values. How- ever, if in rare cases fair
value evidence is available for the un- delivered but not for one or more of the
delivered elements, the amount allocated to the delivered element(s) equals
the total arrangement consideration less the aggregate fair value of the
undelivered element(s) (residual method). If the criteria for the separation of
units of accounting are not met, revenue is deferred until such criteria are met
or until the period in which the last undelivered element is delivered.
Interest income: Interest is recognized using the effective interest method.
Royalties: Royalties are recognized on an accrual basis in accordance with
the substance of the relevant agreement.
Income from lease arrangements: Operating lease income for equipment
rentals is recognized on a straight-line basis over the lease term. An
arrangement that is not in the legal form of a lease is accounted for as a lease
if it is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset. Receivables from finance leases, in which
Siemens as lessor transfers substantially all the risks and re- wards incidental
to ownership to the customer are recognized at an amount equal to the net
investment in the lease. Finance income is subsequently recognized based on
a pattern reflect- ing a constant periodic rate of return on the net investment
us- ing the effective interest method. A selling profit component on
manufacturing leases is recognized based on the policies for outright sales.
Profit from sale and leaseback transactions is recognized immediately if
significant risks and rewards of own- ership have passed to the buyer, the
leaseback results in an operating lease and the transaction is established at
fair value.
Dividends: Dividends are recognized when the right to receive payment is
established.
Novartis
REVENUE RECOGNITION
REVENUE
Revenue is recognized on the sale
of Novartis Group products and services and recorded as “Net sales” in the
consolidated income statement when there is persuasive evidence that a
sales arrangement exists, title and risks and rewards for the products are
transferred to the customer, the price is determinable and collectability is
reasonably assured. When contracts contain customer acceptance provisions,
sales are recognized upon the satisfaction of acceptance criteria. For surgical
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equipment this occurs when title and risk and rewards are transferred after
installation and any required training has been completed. For surgical
equipment leased to customers, revenue representing the net present value
of the minimum lease payments is recognized at the commencement of the
lease term if the lease term is for the major part of the economic life of the
asset or if the payments represent substantially most of its fair value, even if
the legal ownership is not transferred. If products are stockpiled at the request
of the customer, revenue is only recognized once the products have been
inspected and accepted by the customer and there is no right of return or
replenishment on product expiry and cost of storage will be paid by the
customer on normal commercial terms.
Provisions for rebates and discounts granted to government agencies,
wholesalers, retail pharmacies, managed care and other customers are
recorded as a reduction of revenue at the time the related revenues are
recorded or when the incentives are offered. They are calculated on the basis
of historical experience and the specific terms in the individual agreements.
Provisions for refunds granted to health- care providers under innovative payfor-performance agreements are recorded as a reduction of revenue at the
time the related sales are recorded. They are calculated on the basis of
historical experience and clinical data available for the product as well as the
specific terms in the individual agreements. In cases where historical
experience and clinical data are not sufficient for a reliable estimation of the
outcome, revenue recognition is deferred until such history is available.
Cash discounts are offered to customers to encourage prompt payment and
are recorded as revenue deductions. Wholesaler shelf-inventory adjustments
are granted to customers based on the existing inventory of a product at the
time of decreases in the invoice or con- tract price of a product or at the point
of sale if a price decline is reasonably estimable. When there is historical
experience of Novartis agreeing to customer returns or Novartis can otherwise
reasonably estimate expected future returns, a provision is recorded for
estimated sales returns. In doing so the estimated rate of return is applied,
determined based on historical experience of customer returns or considering
any other relevant factors. This is applied to the amounts invoiced also
considering the amount of returned products to be destroyed versus products
that can be placed back in inventory for resale. Where shipments are made
on a re-sale or return basis, with- out sufficient historical experience for
estimating sales returns, revenue is only recorded when there is evidence of
consumption or when the right of return has expired.
Provisions for revenue deductions are adjusted to actual amounts as rebates,
discounts and returns are processed. The provision rep- resents estimates of
the related obligations, requiring the use of judgment when estimating the
effect of these sales deductions.
OTHER REVENUE
Royalty income is reported under “Other revenue” in the consolidated income
statement and recognized on an accrual basis in accordance with the
substance of the relevant agreements.
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Vodafone
Revenue
Revenue is recognised to the extent the Group has delivered goods or
rendered services under an agreement, the amount of revenue can be
measured reliably and it is probable that the economic benefits associated
with the transaction will flow to the Group. Revenue is measured at the fair
value
of the consideration received, exclusive of sales taxes and discounts.
The Group principally obtains revenue from providing the following
telecommunication services: access charges, airtime usage, messaging,
interconnect fees, data services and information provision, connection fees
and equipment sales. products and services may be sold separately or in
bundled packages.
Revenue for access charges, airtime usage and messaging by contract
customers is recognised as services are performed, with unbilled revenue
resulting from services already provided accrued at the end of each period
and unearned revenue from services to be provided in future periods deferred.
Revenue from the sale of prepaid credit is deferred until such time as the
customer uses the airtime� or the credit expires.
Revenue from interconnect fees is recognised at the time the services are
performed.
Revenue from data services and information provision is recognised when the
Group has performed the related service and, depending on the nature of the
service, is recognised either at the gross amount billed to the customer or the
amount receivable by the Group as commission for facilitating the service.
Customer connection revenue is recognised together with the related
equipment revenue to the extent that the aggregate equipment and
connection revenue does not exceed the fair value of the equipment delivered
to the customer. Any customer connection revenue not recognised together
with related equipment revenue is deferred and recognised over the period in
which services are expected to be provided to the customer.
Revenue for device sales is recognised when the device is delivered to the
end customer and the sale is considered complete. For device sales made to
intermediaries, revenue is recognised if the significant risks associated with
the device are transferred to the intermediary and the intermediary has no
general right of return. If the significant risks are not transferred, revenue
recognition is deferred until sale of the device to an end customer by the
intermediary or the expiry of the right of return.
In revenue arrangements including more than one deliverable, the
arrangements are divided into separate units of accounting. deliverables are
considered separate units of accounting if the following two conditions are
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met: (1) the deliverable has value to the customer on a stand-alone basis and
(2) there is evidence of the fair value of the item. The arrangement
consideration is allocated to each separate unit of accounting based on its
relative fair value.
Unilever
REVENUE RECOGNITION
Turnover comprises sales of goods after the deduction of discounts, sales
taxes and estimated returns. It does not include sales between group
companies. Discounts given by Unilever include rebates, price reductions and
incentives given to customers, promotional couponing and trade
communication costs.
Turnover is recognised when the risks and rewards of the underlying products
have been substantially transferred to the customer. Depending on individual
customer terms, this can be at the time of dispatch, delivery or upon formal
customer acceptance.
BG Group
Revenue recognition
Revenue associated with E&P sales (of natural gas, crude oil and petroleum
products) is recorded when title passes to the customer. Revenue from the
production of natural gas and oil in which BG Group has an interest with other
producers is recognised based on the Group’s working interest and the terms
of the relevant production sharing contracts (entitlement method).
Sales of LNG and associated products are recognised when title passes to
the customer. LNG shipping revenue is recognised over the period of the
relevant contract.
All other revenue is recognised when title passes to the customer.
HSBC
Interest income and expense
Interest income and expense for all financial instruments except for those
classified as held for trading or designated at fair value (except for debt
securities issued by HSBC and derivatives managed in conjunction with those
debt securities) are recognised in ‘Interest income’ and ‘Interest expense’ in
the income statement using the effective interest method. The effective
interest method is a way of calculating the amortised cost of a financial asset
or a financial liability (or groups of financial assets or financial liabilities) and of
allocating the interest income or interest expense over the relevant period.
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The effective interest rate is the rate that exactly discounts estimated future
cash receipts or payments through the expected life of the financial instrument
or, where appropriate, a shorter period, to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest rate,
HSBC estimates cash flows considering all contractual terms of the financial
instrument but excluding future credit losses. The calculation includes all
amounts paid or received by HSBC that are an integral part of the effective
interest rate of a financial instrument, including transaction costs and all other
premiums or discounts.
Interest on impaired financial assets is recognised using the rate of interest
used to discount the future cash flows for the purpose of measuring the
impairment loss.
(b) Non-interest income
Fee income is earned from a diverse range of
services provided by HSBC to its customers. Fee income is accounted for as
follows:
income earned on the execution of a significant act is
recognised as revenue when the act is completed (for example, fees
arising from negotiating, or participating in the negotiation of, a
transaction for a third party, such as an arrangement for the acquisition
of shares or other securities); income earned from the provision of services is recognised as
revenue as the services are provided (for example, asset management,
portfolio and other management advisory and service fees); and income which forms an integral part of the effective interest rate
of a financial instrument is recognised as an adjustment to the effective
interest rate (for example, certain loan commitment fees) and recorded
in ‘Interest income’. Net trading income comprises all gains and
losses from changes in the fair value of financial assets and financial
liabilities held for trading, together with the related interest income,
expense and dividends. Net income/(expense) from financial
instruments designated at fair value includes: − all gains and losses from changes in the fair value of financial
assets and financial liabilities designated at fair value through profit or
loss, including liabilities under investment contracts; − all gains and losses from changes in the fair value of
derivatives that are managed in conjunction with financial assets and
liabilities designated at fair value through profit or loss; and − interest income, interest expense and dividend income in
respect of:
– financial assets and financial liabilities designated at fair
value through profit or loss; and – derivatives managed in conjunction
with the above, except for interest arising from debt securities issued
by HSBC and derivatives managed in conjunction with those debt
securities, which is recognised in ‘Interest expense’. (Note 2a). 11
Dividend income is recognised when the right to receive payment is
established. This is the ex-dividend date for listed equity securities, and
usually the date when shareholders have approved the dividend for
unlisted equity securities. LVMH
Revenue recognition
Definition of revenue
Revenue mainly comprises retail sale within the Group’s store network
and sales through agents and distributors. Sales made in stores owned by
third parties are treated as retail transactions if the risks and rewards of
ownership of the inventories are retained by the Group.
Direct sales to customers are made through retail stores for Fashion and
Leather Goods and Selective Retailing, as well as certain Watches and
Jewelry and Perfumes and Cosmetics brands. These sales are
recognized at the time of purchase by retail customers.
Wholesale sales concern Wines and Spirits, as well as certain Perfumes
and Cosmetics and Watches and Jewelry brands. The Group recognizes
revenue when title transfers to third party customers, generally upon
shipment.
Revenue includes shipment and transportation costs re-billed to
customers only when these costs are included in products’ selling prices
as a lump sum.
Revenue is presented net of all forms of discount. In particular, payments
made in order to have products referenced or, in accordance with
agreements, to participate in advertising campaigns with the distributors,
are deducted from related revenue.
Provisions for product returns
Perfumes and Cosmetics and, to a lesser extent, Fashion and Leather
Goods and Watches and Jewelry companies may accept the return of
unsold or outdated products from their customers and distributors.
Where this practice is applied, revenue and the corresponding trade
receivables are reduced by the estimated amount of such returns, and a
corresponding entry is made to inventories. The estimated rate of returns
is based on statistics of historical returns.
Total
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Sales and revenues from sales
Sales figures include excise taxes collected by the Group within the course of its
oil distribution operations. Excise taxes are deducted from sales in order to obtain
the “Revenues from sales” indicator.
(i) Sale of goods
Revenues from sales are recognized when the significant risks and rewards of
ownership have been passed to the buyer and when the amount is recoverable
and can be reasonably measured.
Revenues from sales of crude oil, natural gas and coal are recorded upon transfer
of title, according to the terms of the sales contracts.
Revenues from the production of crude oil and natural gas properties, in which
the Group has an interest with other producers, are recognized based on actual
volumes sold during the period. Any difference between volumes sold and
entitlement volumes, based on the Group net working interest, is recognized
as
“Crude oil and natural gas inventories” or “Other current assets”
or “Other
creditors and accrued liabilities”, as appropriate.
Quantities delivered that represent production royalties and taxes, when paid in
cash, are included in oil and gas sales, except for the United States and Canada.
Certain transactions within the trading activities (contracts involving quantities
that are purchased from third parties then resold to third parties) are shown at
their net value in sales.
Exchanges of crude oil and petroleum products within normal Trading activities
do not generate any income and therefore these flows are shown at their net
value in both the statement of income and the balance sheet.
ii) Sale of services
Revenues from services are recognized when the services have been rendered.
Revenues from gas transport are recognized when services are rendered. These
revenues are based on the quantities transported and measured according to
procedures defined in each service contract.
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Shipping revenues and expenses from time-charter activities are recognized on a
pro rata basis over a period that commences upon the unloading of the previous
voyage and terminates upon the unloading of the current voyage. Shipping
revenue recognition starts only when a charter has been agreed to by both the
Group and the customer.
(iii) Solar Farm Development Projects
SunPower develops and sells solar farm projects. This activity generally contains a
property component (land ownership or an interest in land rights). The revenue
associated with the development of these projects is recognized when the
entities-projects and land rights are irrevocably sold.
Revenues under contracts for construction of solar systems are recognized based
on the progress of construction works, measured according to the percentage of
costs incurred relative to total forecast costs.
BNP Paribas
INCOME AND EXPENSES ARISING FROM FINANCIAL ASSETS AND
FINANCIAL LIABILITIES Income and expenses arising from financial instruments measured at
amortised cost and from fixed- income securities classified in “Available-forsale financial assets” are recognised in the profit and loss account using the
effective interest method. The effective interest rate is the rate that exactly
discounts estimated future cash flows through the expected life of the
financial instrument or, when appropriate, a shorter period, to the net
carrying amount of the asset or liability in the balance sheet. The effective
interest rate calculation takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts. The method used by the Group to
recognise service-related commission income and expenses depends on
the nature of the service. Commission treated as an additional component
of interest is included in the effective interest rate, and is recognised in the
profit and loss account in “Net interest income”. Commission payable or
receivable on execution of a significant transaction is recognised in the
profit and loss account in full on execution of the transaction, under
“Commission income and expense”. Commission payable or receivable for
recurring services is recognised over the term of the service, also under
“Commission income and expense”. Commission received in respect of
financial guarantee commitments is regarded as representing the fair value
of the commitment. The resulting liability is subsequently amortised over the
term of the commitment, under commission income in Revenues. BP
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Revenue Revenue arising from the sale of goods is recognized when the significant
risks and rewards of ownership have passed to the buyer, which is typically at
the point that title passes, and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods provided in the
normal course of business, net of discounts, customs duties and sales taxes.
Physical exchanges are reported net, as are sales and purchases made
with a common counterparty, as part of an arrangement similar to a physical
exchange. Similarly, where the group acts as agent on behalf of a third party
to procure or market energy commodities, any associated fee income is
recognized but no purchase or sale is recorded. Additionally, where forward
sale and purchase contracts for oil, natural gas or power have been
determined to be for trading purposes, the associated sales and purchases
are reported net within sales and other operating revenues whether or not
physical delivery has occurred Generally, revenues from the production of oil and natural gas properties in
which the group has an interest with joint operation partners are recognized
on the basis of the group’s working interest in those properties (the
entitlement method). Differences between the production sold and the group’s
share of production are not significant.
Interest income is recognized as the interest accrues (using the effective
interest rate that is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument to the net
carrying amount of the financial asset).
Dividend income from investments is recognized when the shareholders’ right
to receive the payment is established.
Nestlé
Revenue
Sales represent amounts received and receivable from third parties for
goods supplied to the customers and for services rendered. Revenue from the
sales of goods is recognised in the income statement at the moment when the
significant risks and rewards of ownership of the goods have been transferred
to the buyer, which is mainly upon shipment.
It is measured at the list price applicable to a given distribution channel
after deduction of returns, sales taxes, pricing allowances, other trade
discounts and couponing and price promotions to consumers. Payments
made to the customers for commercial services received are expensed.
Other revenue is primarily license fees from third parties which have
been earned during the period.
Telefonica
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l) Revenue and expenses
The Telefónica Group revenues are derived principally from providing the
following telecommunications services: traffic, connection fees, regular
(normally monthly) network usage fees, interconnection, network and
equipment leasing, handset sales and other services such as pay TV and
value-added services (text or data messages, among others) or maintenance.
Products and services may be sold separately or bundled in promotional
packages.
Revenues from calls carried on Telefónica’s networks (traffic) entail an initial
call establishment fee plus a variable call rate, based on call length, distance
and type of service .Both wireline and wireless traffic is recognized as
revenue as service is provided. For prepaid calls, the amount of unused traffic
generates a deferred revenue presented in “Trade and other payables” on the
statement of financial position. Prepaid cards generally expire within 12
months and any deferred revenue from prepaid traffic is recognized directly in
the income statement when the card expires as the Group has no obligation
to provide service after expiry date.
Revenues from traffic sales and services at a fixed rate over a specified
period of time (flat rate) are recognized on a straight-line basis over the term
covered by the rate paid by the customer.
Connection fees arising when customers connect to the Group’s network are
deferred and recognized in the income statement throughout the average
estimated customer relationship period, which varies by type of service. All
related costs, except those related to network expansion, as well as
administrative expenses and overhead, are recognized in the income
statement as incurred.
Installation fees are taken to the income statement on a straight-line basis
over the related period. Equipment leases and other services are taken to
profit or loss as they are consumed.
Interconnection revenues from wireline-wireless and wireless-wireline calls
and other customer services are recognized in the period in which the calls
are made.
Revenues from handset and equipment sales are recognized once the sale is
considered complete, i.e., generally when delivered to the end customer.
Bundled packages, which include multiple elements, are sold in the wireline,
wireless and internet businesses. They are assessed to determine whether it
is necessary to separate the separately identifiable elements and apply the
corresponding revenue recognition policy to each element. Total package
revenue is allocated among the identified elements based on their respective
fair values (i.e. the fair value of each element relative to the total fair value of
the package).
As connection or initial activation fees, or upfront non-refundable fees, are not
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separately identifiable elements in these types of packages, any revenues
received from the customer for these items are allocated to the remaining
elements. Additionally, when allocating the package revenue to the elements,
amounts contingent upon delivery of undelivered elements are not allocated
to delivered elements.
All expenses related to bundled promotional packages are recognized in the
income statement as incurred.
Inditex
Rio Tinto
c) Sales revenue
Sales revenue comprises sales to third parties at invoiced amounts. Most
sales are priced ex works, free on board (fob) or cost, insurance and freight
(cif). Amounts billed to customers in respect of shipping and handling are
classified as sales revenue where the Group is responsible for carriage,
insurance and freight. All shipping and handling costs incurred by the Group
are recognised as operating costs. If the Group is acting solely as an agent,
amounts billed to customers are offset against the relevant costs. Revenue
from services is recognised as services are rendered and accepted by the
customer.
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Sales revenue excludes any applicable sales taxes. Mining royalties are
presented as an operating cost or, where they are in substance a profit-based
tax, within taxation.
Revenues from the sale of significant by-products, such as gold, are included
in sales revenue. Sundry revenue, incidental to the main revenue-generating
activities of the operations, and which is a consequence of producing and
selling the main products, is treated as a credit to operating costs.
Third-party commodity swap arrangements for delivery and receipt of smelter
grade alumina are offset within operating costs. Sales revenue is only
recognised on individual sales when all of the following criteria are met:
the significant risks and rewards of ownership of the product have been
transferred to the buyer;
neither continuing managerial involvement to the
degree usually associated with ownership, nor effective control over the
goods sold, has been retained; the amount of revenue can be measured
reliably;
it is probable that the economic benefits associated with the sale will
flow to the Group; and
the costs incurred or to be incurred in respect of the
sale can be measured reliably.
These conditions are generally satisfied when title passes to the customer. In
most instances, sales revenue is recognised when the product is delivered to
the destination specified by the customer, which is typically the vessel on
which it will be shipped, the destination port or the customer’s premises.
The majority of the Group’s products are sold to customers under contracts,
which vary in tenure and pricing mechanisms, with some volumes sold in the
spot market.
Pricing for iron ore is on a range of terms, the majority being either monthly or
quarterly average pricing mechanisms, with a smaller proportion of iron ore
volumes being sold on the spot market. Substantially all iron ore sales are
reflected at final prices in the results for the period, based on the best
available information at the period end.
Sales revenue is commonly subject to adjustment based on an inspection of
the product by the customer. In such cases, sales revenue is initially
recognised on a provisional basis using the Group’s best estimate of
contained metal, and adjusted subsequently.
Certain products are “provisionally priced”, ie the selling price is subject to
final adjustment at the end of a period normally ranging from 30 to 180 days
after delivery to the customer. The final price is based on the market price at
the relevant quotation point stipulated in the contract.
As is customary in the industry, revenue on provisionally-priced sales is
recognised based on estimates of the fair value of the consideration
receivable based on relevant forward market prices. At each reporting date,
provisionally priced metal is marked to market based on the forward selling
price for the quotational period stipulated in the contract. For this purpose, the
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selling price can be measured reliably for those products, such as copper, for
which there exists an active and freely-traded commodity market such as the
London Metals Exchange and the value of product sold by the Group is
directly linked to the form in which it is traded on that market. The marking to
market of provisionally-priced sales contracts is recorded as an adjustment to
sales revenue. Information on provisionally-priced sales contracts is included
in note 30.
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