As a follow-up to my previous post about mobile subsidies, it’s important to note that new IFRS financial accounting rules affecting them are under discussion (IAS 18: Revenue in Relation to Bundled Sales), even though they are not expected to come by 2015. Traditionally, mobile revenue per month is recognised for the whole bundled mobile contract, the cost of the handset is expensed on the first day of the contract and the initial subsidised payment, if any, is reported; under the forthcoming accounting proposals, these subsidised contracts would be effectively unbundled and interests would be taken into consideration.  That is, a receivable for the unsubsidised fair value of the terminal would be recognised on the first day and every monthly instalment per month would be proportionally split into two parts: a fraction to settle the terminal receivables with their corresponding income from interests, the handset being recognised at inception of the contract, and the rest will be booked as revenue for the services.

These changes will provide a much more faithful view of the real nature of the current mobile business model: handsets are just not marketing expenses but integral to the whole mobile experience, therefore their costs won’t be diffused with other charges and profits and revenue will stop being misstated. But on the other hand, the new approach is more imprudent and the treatment of the breach of mobile contracts will further introduce unnecessary complexity.


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