Compiler’s Note: In recent weeks, companies engaged in e-commerce, gaming and fintech have come out with IPOs or are in the process of doing so. These companies operate on very different business models without any ‘brick and mortar’ assets. Given below are the Revenue Recognition policies for a few such companies (from the annual reports where available, or offer documents filed with SEBI).
ONE97 COMMUNICATIONS LTD. (PAYTM)
Revenue Recognition
Revenue is measured based on the consideration specified in a contract with a customer net of variable consideration, e.g., discounts, volume rebates, any payments made to a customer (unless the payment is for a distinct good or service received from the customer) and excludes amounts collected on behalf of third parties. The Company recognises revenue when it transfers control over a product or service to a customer. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur.
The Company provides incentives to its users in various forms including cashbacks. Incentives which are consideration payable to the customer that are not in exchange for a distinct good or service are generally recognised as a reduction of revenue.
Where the Company acts as an agent for selling goods or services, only the commission income is included within revenue. The specific revenue recognition criteria described below must also be met before revenue is recognised. Typically, the Company has a right to payment before or at the point that services are delivered. Cash received before the services are delivered is recognised as a contract liability. The amount of consideration does not contain a significant financing component as payment terms are less than one year.
Sale of services
Revenue from services is recognised when the control in services is transferred as per the terms of the agreement with the customer, i.e., as and when services are rendered. Revenues are disclosed net of the Goods and Services Tax charged on such services. In terms of the contract, excess of revenue over the billed at the year-end is carried in the balance sheet as unbilled revenue under other financial assets where the amount is recoverable from the customer without any future performance obligation. Cash received before the services are delivered is recognised as a contract liability.
Commission
The Company facilitates recharge of talk time, bill payments and availability of bus tickets and earns commission for the respective services. Commission income is recognised when the control in services is transferred to the customer when the services have been provided by the Company.
Service fees from merchants
The Company earns service fee from merchants and recognises such revenue when the control in services have been transferred by the Company, i.e., as and when services have been provided by the Company. Such service fee is generally determined as a percentage of transaction value executed by the merchants. The amounts received by the Company pending settlement are disclosed as payable to the merchants under contract liabilities.
Other operating revenue
Where the Company is contractually entitled to receive claims / compensation in case of non-discharge of obligations by customers, such claims / compensations are measured at amount receivable from such customers and are recognised as other operating revenue when there is a reasonable certainty that the Company will be able to realise the said amounts.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
ZOMATO LTD.
Revenue recognition
The Group generates revenue from online food delivery transactions, advertisements, subscriptions, sale of traded goods and other platform services.
Revenue is recognised to depict the transfer of control of promised goods or services to customers upon the satisfaction of performance obligation under the contract in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Consideration includes goods or services contributed by the customer, as non-cash consideration, over which the Group has control.
Where performance obligation is satisfied over time, the Group recognises revenue over the contract period. Where performance obligation is satisfied at a point in time, the Group recognises revenue when customer obtains control of promised goods and services in the contract.
Revenue is recognised net of any taxes collected from customers, which are remitted to governmental authorities.
Revenue from platform services and transactions
The Group through its platform allows transactions between the consumers and restaurant partners enlisted with the platform. These could be for food orders placed online on the platform by the consumer or through a consumer availing offers from restaurant partners upon a visit to the restaurant. The Group earns commission income on such transactions from the restaurant partners upon completion of the transaction.
The Group is merely a technology platform provider where delivery partners are able to provide their delivery services to the restaurant partners and the consumers. For the platform provided by the Group to the delivery partners, the Group may charge a platform fee from the delivery partners. Up to 28th October, 2019, for orders where the Group was responsible for delivery, the delivery charges were recognised on the completion of the order’s delivery.
In cases where the Group undertakes to run the business for an independent third party, income is recognised on completion of service in accordance with the terms of the contract.
Advertisement revenue
Advertisement revenue is derived principally from the sale of online advertisements which is usually run over a contracted period of time. The revenue from advertisements is thus recognised over this contract period as the performance obligation is met over the contract period. There are some contracts where in addition to the contract period, the Group assures certain ‘clicks’ (which are generated each time viewers on our platform click through the advertiser’s advertisement on the platform) to the advertisers. In these cases, the revenue is recognised when both the conditions of time period and number of clicks assured are met.
Subscription revenue
Revenues from subscription contracts are recognised over the subscription period on systematic basis in accordance with the terms of agreement entered into with the customer.
Sign-up revenue
The Group receives a sign-up amount from its restaurant partners and delivery partners. These are recognised on receipt or over a period of time in accordance with the terms of agreement entered into with such relevant partner.
Delivery facilitation services
The Group is merely a technology platform provider for delivery partners to provide their delivery services to the restaurant partners / consumers and not providing or taking responsibility of the said services. For the service provided by the Group to the delivery partners, the Group may charge a platform fee from the delivery partners.
Sale of traded goods
Revenue is recognised to depict the transfer of control of promised goods to merchants upon the satisfaction of performance obligation under the contract in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. Consideration includes goods contributed by the customer, as non-cash consideration, over which the Group has control.
The amount of consideration disclosed as revenue is net of variable considerations like incentives or other items offered to the customers.
Incentives
The Group provides various types of incentives to transacting consumers to promote the transactions on our platform.
Since the Group identified the transacting consumers as one of our customers for delivery services when the Group is responsible for the delivery services, the incentives offered to transacting consumers are considered as payment to customers and recorded as reduction of revenue on a transaction by transaction basis. The amount of incentive in excess of the delivery fee collected from the transacting consumers is recorded as advertisement and sales promotion expenses.
When incentives are provided to transacting consumers where the Group is not responsible for delivery, the transacting consumers are not considered customers of the Group and such incentives are recorded as advertisement and sales promotion expenses.
Interest
Interest income is recognised using the effective interest method. Interest income is included under the head ‘other income’ in the consolidated statement of profit and loss.
NAZARA TECHNOLOGIES LTD.
Revenue recognition
Revenue arises mainly from income from services, other operating income, other income and dividends.
To determine whether the Company should recognise revenues, the Company follows a 5-step process:
a. identifying the contract, or contracts, with a customer,
b. identifying the performance obligations in each contract,
c. determining the transaction price,
d. allocating the transaction price to the performance obligations in each contract,
e. recognising revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
Revenue from operations
Revenue from subscription / download of games / other contents is recognised when a promise in a customer contract (performance obligation) has been satisfied, usually over the period of subscription. The amount of revenue to be recognised (transaction price) is based on the consideration expected to be received in exchange for services, net of credit notes, discounts, etc. If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on their relative standalone selling price.
Revenue from advertising services, including performance-based advertising, is recognised after the underlying performance obligations have been satisfied, usually in the period in which advertisements are displayed.
Revenue is reported on a gross or net basis based on management’s assessment of whether the Company is acting as a principal or agent in the transaction. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the good or service are controlled prior to transfer to the customer.
Revenue is measured at the fair value of the consideration received or receivable, considering contractually defined terms of payment, and excluding variable considerations such as volume or cash discounts and taxes or duties collected on behalf of the Government.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made.
A contract liability is an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer and presented as ‘Deferred revenue’. Advance payments received from customers for which no services have been rendered are presented as ‘Advance from customers’.
Unbilled revenues are classified as a financial asset where the right to consideration is unconditional upon passage of time.
Other operating revenue
Other operating revenue mainly consists of Technology Platform / Digital Marketing / Administrative & Business Supporting / Recharge services to subsidiaries and is recognised in the period in which services are rendered.
Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the Government.
Other income
Interest income is recorded using the effective interest rate (‘EIR’) method. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or over a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of the financial liability. Interest income is included under the head ‘finance income’ in the statement of profit and loss account.
Dividends
Dividend income is recognised when the Company’s right to receive dividend is established by the reporting date. The right to receive dividend is generally established when shareholders approve the dividend.
PB FINTECH LTD. (POLICYBAZAR)
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognises revenue as follows:
Sale of services
The Company earns revenue from services as described below:
1) Online marketing and consulting services – includes bulk e-mailers, advertisement banners on its website and credit score advisory services;
2) Marketing support services – includes road-show services;
3) Commission on online aggregation or financial products – includes commission earned for sale of financial products based on the leads generated from its designated website;
4) IT Support Services – includes services related to IT applications and solutions.
Revenue from above services (other than IT Support Services) is recognised at a point in time when the related services are rendered as per the terms of the agreement with the customer. Revenue from IT Support Services is recognised over time. Revenues are disclosed net of the Goods and Service Tax charged on such services. In terms of the contract, excess of revenue over the billed at the year-end is carried in the balance sheet as unbilled trade receivables as the amount is recoverable from the customer without any future performance obligation. Cash received before the services are delivered is recognised as a contract liability, if any.
Revenue from above services is recognised in the accounting period in which the services are rendered. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.
Intellectual Property Rights (IPR) fees
Income from IPR fees is recognised on an accrual basis in accordance with the substance of the relevant agreements. [Refer Note 29.]
API HOLDINGS LIMITED (PHARMEASY)
Revenue Recognition
Sale of pharmaceutical and related products:
The Group derives revenue primarily from sale of pharmaceutical and related products and rendering of pharmacy support services, business support services, lab test-related services, commission from lab services and technology platform services. Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Group expects to receive in exchange for those products or services. Amounts disclosed as revenue are net of trade allowances, rebates and Goods and Services Tax (GST), amounts collected on behalf of third parties and includes reimbursement of out-of-pocket expenses, with corresponding expenses included in cost of revenues.
Revenue from the rendering of services and sale of pharmaceutical and related products is recognised when the Group satisfies its performance obligations to its customers as below:
Revenue from sale of pharmaceutical and related products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the products. In determining the transaction price for rendering of services, the Group considers the effect of variable consideration, existence of a significant financing component, non-cash consideration, and consideration payable to the customers, if any. Revenue is recognised net of trade and cash discounts. The Group collects Goods and Services Tax (GST) on behalf of the Government and, therefore, it is not an economic benefit flowing to the Group. Hence, it is excluded from revenue.
Revenue from rendering services
Revenue from pharmacy support services, business support services, lab test services, technology platform services and commission from lab services are recognised as and when services are rendered as per terms of agreement, i.e., at the point in time. The Group collects Goods and Services Tax (GST) on behalf of the Government and, therefore, it is not an economic benefit flowing to the Group. Hence, it is excluded from revenue. In determining the transaction price for rendering of services, the Group considers the effect of variable consideration, existence of a significant financing component, non-cash consideration, and consideration payable to the customers, if any. Revenue is recognised net of trade and cash discounts.
VERANDAH LEARNING SOLUTIONS LTD.
Revenue Recognition
Operating revenue:
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The Company derives its revenue from Edutech services (online and offline) by providing comprehensive learning programmes.
A. Online revenue:
Revenue from sale of online courses is recognised based on satisfaction of performance obligations as below:
i) Supply of books is recognised when control of the goods is transferred to the customer at an amount
that reflects the consideration entitled as per the contract / understanding in exchange for the goods or services.
ii) Supply of online content is recognised upfront upon access being provided for the uploaded content to the learners.
iii) Supply of hosting service is recognised over the period of license of access provided to the learners at an amount that reflects the consideration entitled as per the contract / understanding in exchange for such services.
B. Offline revenue:
Revenue from offline courses are recognised as revenue on a pro rata based on actual classes conducted by the educators. The Company does not assume any post-performance obligation after the completion of classes. Revenue received for classes to be conducted subsequent to the year-end is considered as Deferred revenue which is included in other current liabilities.
C. Revenue from delivery partner: License fee is recognised at a point in time upon transfer of the license to customers.
Other operating revenue
Shipping revenue is recognised at the time of delivery to end customers. Shipping revenue received towards deliveries subsequent to the year-end is considered as Deferred revenue which is included in other current liabilities.
