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B1 Revenue and other income

The effect of initially applying AASB 15 from 1 July 2018 on NBN Co’s revenue from contracts with customers is described in Note H8. Due to the transition method chosen in applying AASB 15, comparative information has not been restated to reflect the new requirements. The adoption of AASB 15 did not have a material impact on the Group and there would be no change to the comparative revenue disclosed if it had been retrospectively restated under AASB 15.

NBN Co generates revenue primarily from the provision of telecommunications services to its customers. Other sources of revenue include new development fees, lease and license fees and commercial works activities.

Revenue from contracts with customers

NBN Co Group

30 June 2019

30 June 2018

For the year ended

$m

$m

Telecommunications revenue

2,643

1,818

Other revenue

182

160

Total

2,825

1,978

Telecommunications revenue
Telecommunications services are facilitated through contracting with Retail Service Providers (RSPs) under the Wholesale Broadband Agreement (WBA). The revenue from the provision of telecommunications services includes recurring wholesale-only broadband network revenue and recurring facility access services revenue. There are also non-recurring revenues in the form of ancillary and service charges. Pricing for the various product offerings is set out in the WBA. The WBA also contains credits and rebates that are available to all RSPs on an equal basis.

Telecommunications revenue currently accounts for over 90% of Group revenue.

For telecommunications revenue, NBN Co recognises revenue for the amount to which it has a right to invoice.

Recurring telecommunications revenues
Broadband network services relate to the provision of NBN Co’s wholesale broadband products to RSPs which are then sold to customers. The performance obligations associated with these products are satisfied over time, as the RSPs receive the benefits of NBN Co’s wholesale broadband products throughout the period. NBN Co transfers control of the wholesale broadband products to the RSP evenly over the period and recognises revenue accordingly. Over this period, the RSPs are able to obtain value from NBN Co’s products through the sale of broadband services to customers. The Group invoices the RSP on a monthly basis, with standard short-term payment terms and therefore no financing component exists. Applicable credits and rebates are recognised as a reduction to the transaction price during the period to which they relate.

Non-recurring telecommunications revenues
Telecommunications revenue includes non-recurring non-refundable upfront fees for connection charges, installation charges, service transfers and RSP end-user contributions to connect new developments. Upfront fees will be recognised at the point in time when these services are provided.

Other revenue
NBN Co generates other non-telecommunications revenue from construction and lease activity, via separate contractual arrangements. The construction contracts include commercial works, technology choice and new development fees. Invoices are on standard short-term payment terms and therefore no financing component exists.

Commercial works are construction type contracts based on requests from customers for NBN Co to relocate cables and network equipment, while technology choice revenues relate to application, design and construction fees from customers who opt for alternative technologies other than those being offered at their premise. New development fees represent consideration for the deployment of infrastructure and backhaul construction.

For construction-type contracts, NBN Co recognises revenue over time on a straight-line basis over the construction period as this represents the transfer of benefits to the customer.

NBN Co also earns non-telecommunications revenue through the license of copper and HFC access to Telstra. Under the RDAs, NBN Co progressively takes ownership of elements of Telstra’s copper and HFC networks. NBN Co assures and maintains these copper and HFC network elements and provides a license back to Telstra for the right to access the nbn™ network and deliver legacy services during the co-existence period. NBN Co charges Telstra recurring license fees, which are billed quarterly, and one-off upfront installation fees where Telstra orders new licenses from NBN Co.

Recurring license fees paid in advance each quarter are deferred and recognised to revenue on a straight-line basis over the quarter they relate to, as this is the period that NBN Co satisfies the performance obligation. Upfront installation fees are recognised as the service is rendered.

Further disaggregation of revenue
The Group has not provided further disaggregation of revenue based upon the timing of recognition (i.e. whether products are transferred at a point in time or over time) as the revenue transferred at a point in time is not material.

Assets and liabilities related to contracts with customers
NBN Co has recognised the following assets and liabilities related to contracts with customers:

30 June 2019

30 June 20181

$m

$m

Trade receivables (note C2)

304

212

Contract liabilities (note C6)

123

90

1 The Group recognised the cumulative effect of initially applying AASB 15 as an adjustment to the opening balance at 1 July 2018

Contract liabilities are recognised due to differences between the timing of consideration received and satisfaction of the associated performance obligations in relation to contracts with customers.

A contract liability for deferred revenue is recorded for obligations under contracts for which payment has been received in advance. Contract liabilities unwind as “revenue from contracts with customers” upon satisfaction of the performance obligations under the terms of the contract.

There were no significant changes in contract balances due to remeasurement or impairment in the period. Changes in the balances were related to the performance of obligations under contracts, or the deferral and accrual of new revenues related to contracts in the period.

NBN Co applies the practical expedient in paragraph 121 of AASB 15 and does not disclose information about remaining performance obligations that have durations of one year or less.

Significant changes in the contract liabilities balances during the period are as follows:

Contract liabilities

$m

Balance at 1 July 2018

90

Revenue recognised that was included in the contract liability balance at the beginning of the period

(70)

Increases due to cash received, excluding amounts recognised as revenue during the period

103

Balance at 30 June 2019

123

Revenue recognition policy
Revenue is measured based upon the consideration specified within a contract with a customer and recognised as the Group transfers control over an asset or service to a customer. The Group follows the 5-step approach outlined in AASB 15.

Other income - gifted assets and government grants

NBN Co Group

30 June 2019

30 June 2018

For the year ended

$m

$m

Other income - gifted assets and government grants

23

19

Total other income

23

19