IFRS 15 revenue policies including extended warranties and related contract liability, disaggregation of revenue, estimates

GN Store Nord A/S – Annual report – 31 December 2018

Industry: manufacturing

2.1 Segment disclosures (extract)

Accounting policies (extract)

Revenue (extract 1)

Revenue from the sale of hearing aids and headset solutions is recognized in the income statement when the customer obtains control of the goods. When considering at what point in time the customer obtains control of the goods, a number of indicators are considered, including whether:

  • GN Store Nord has a present right to payment for the goods.
  • The customer has legal title to the goods.
  • The customer has physical possession of the goods.
  • The customer has the significant risks and rewards of ownership of the goods.
  • The customer has accepted the goods.

In the majority of sales the customer obtains control of the goods either upon shipment from a distribution hub or upon delivery to the customer.

The amount of revenue recognized varies with discounts and rebates offered to customers. Discounts and rebates are estimated based on the expected amount to be provided to the customers and reduce revenues recognized. Revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. Revenue from contracts in which GN provides on-going access to research against a fee and in which the counterparty reasonably expects that GN will continue to perform research is recognized over the access period.

When goods are sold with a right of return, a refund liability and a right to the returned products are recognized as a provision and a current asset, respectively. The refund liability is deducted from revenue and the right to the returned products is offset in cost of sales. The portion of goods sold that is expected to be returned is estimated based on historical product returns data. The estimated amounts of both returns, discounts and rebates are reassessed at each reporting date.

GN Store Nord typically provides warranties for general repairs of defects that existed at the time of sale, as required by law. These assurance-type warranties are accounted for as described in the accounting policies for warranty provisions.

As part of a sales transaction, certain future services such as extended warranties may be included. In case such service-type warranties are sold, the transaction price is allocated to the promised goods and services based on stand-alone selling prices. Observable prices are as far as possible used to determine the stand-alone selling prices but if such are not available a cost plus a margin approach is used. Extended warranties are initially recognized as contract liabilities in the balance sheet and recognized in the income statement on a straight-line basis over the term of the extended warranty period.

The typical payment terms for customers is between 30 and 60 days. GN Store Nord does not expect to have contracts with payment terms exceeding one year. As a consequence the transaction prices are not adjusted for the time value of money. Revenue is measured excluding VAT, taxes and granted cash and quantity discounts in relation to the sale and expected returns of goods.

Revenue (extract 2)

Significant accounting estimates

Certain contracts with customers include a right of return and volume rebates that give rise to variable consideration. In estimating the variable consideration GN Store Nord is required to use either the expected value method or the most likely amount method based on which method better predicts the amount of consideration to which it will be entitled. Significant accounting estimates and judgments involve determining the portion of expected returns of goods as well as the amount of discounts and rebates. The portion of goods sold that is expected to be returned is estimated based on historical product returns data.

In sales, where the customer obtains control of the goods upon delivery to the customer, the significant judgments made in determining when the customer obtains control of promised goods involve determining when a customer has physical possession of the goods and when the customer has accepted the goods due to uncertainty in transportation time.

2.2 Revenue and geographical information (extract 1)

gnstore2

Revenue is predominantly recognized at a point in time, and revenue recognized over time is not significant. Revenues are attributed to countries on the basis of the customer’s location. Only the US represents a material single country. One distributor in the Audio segment comprises more than 10 % of the group’s total revenues amounting to DKK 1,223 million (2017: DKK 890 million).

2.2 Revenue and geographical information (extract 2)

Contract liabilities

GN Store Nord has recognized the following revenue-related contract liabilities:

gnstore3

 

Advertisements