Rogers Communications Inc. is a diversified Canadian communications and media company engaged in three primary lines of
Rogers Communications Inc. is a diversified Canadian communications and media company engaged in three primary lines of business: Wireless, Cable, and Media. The following is part of Rogers\' revenue recognition policy note in its 2017 financial statements:
ROGERS COMMUNICATIONS INC.
Notes to the Financial Statements
December 31, 2017
NOTE 5: REVENUE
We recognize revenue when we can estimate its amount, have delivered on our obligations within the revenue-generating arrangements, and are reasonably assured that we can collect it. Revenue is recognized net of discounts.
|Source of revenue
|How we recognize revenue
Monthly subscriber fees for:
|Revenue from roaming, long distance, pay per use, and other optional or non-subscription services and other sales of products
|Revenue from the sale of wireless and cable equipment
|Equipment subsidies related to providing equipment to new and existing subscribers
|Activation fees charged to subscribers in Wireless
|Monthly subscription revenue received by television stations for subscriptions from cable and satellite providers
|Toronto Blue Jays revenue from home game admission and concessions
|Toronto Blue Jays revenue from Major League Baseball, including fund redistribution and other distributions.
|Revenue from Toronto Blue Jays, radio, and television broadcast agreements
|Revenue from sublicensing of program rights
|Rewards granted to customers through customer loyalty programs, which are considered a separately identifiable component of the sales transactions
|Interest income on credit card receivables
Multiple Deliverable Arrangements
We offer some products and services as part of multiple deliverable arrangements. We recognize these as follows:
- divide the products and services into separate units of accounting, as long as the delivered elements have stand-alone value to customers and we can determine the fair value of any undelivered elements objectively and reliably; then
- measure and allocate the arrangement consideration among the accounting units based on their relative fair values and recognize revenue related to each unit when the relevant criteria are met for each unit individually; however
- when an amount allocated to a delivered item is contingent upon the delivery of additional items or meeting specified performance conditions, the amount allocated to the delivered item is limited to the non-contingent amount, as applicable.
We recognize payments we receive in advance of providing goods and services as unearned revenue. Advance payments include subscriber deposits, cable installation fees, ticket deposits related to Toronto Blue Jays ticket sales, and amounts subscribers pay for services and subscriptions that will be provided in future periods.
|Years ended December 31
|(In millions of dollars)
|Total Business Solutions
|Corporate items and intercompany eliminations
Rogers\' balance sheet included a current liability of $346 million at December 31, 2017, called Unearned Revenue. Unearned revenue includes subscriber deposits, cable installation fees, and amounts received from subscribers related to services and subscriptions to be provided in future periods.
a. When does Rogers recognize its revenue from monthly subscriber fees?
b. When should Rogers record unearned revenue from its subscription services? When should it record unearned revenue for its Blue Jays home game admission revenue?
c. If Rogers (inappropriately) recorded these unearned revenues as revenue when the cash was received in advance, what would be the effect on the company\'s financial position? (Use the basic accounting equation and explain what elements would be overstated or understated.)