RWS Annual Report 2022 web - Flipbook - Page 116
Notes to the Consolidated Financial Statements (continued)
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting Policy
IFRS 15 provides a single, principles based five step model
to be applied to all sales contracts as outlined below. It
is based on the transfer of control of goods and services
to customers and replaces the separate models for
goods and services. The specific application of the five
step principles of IFRS 15 as they apply to the Group’s
revenue contracts with customers are explained below at
an income stream level. In addition to this, the individual
performance obligations identified within the Group’s
contracts with customers are individually described as
part of this note to the financial statements.
For multi-element arrangements, revenue is allocated to
each performance obligation based on stand-alone selling
price, regardless of any separate prices stated within the
contract. This is most common within the Group’s contract
for technology licences, which may include performance
obligations in respect of the licences, support and
maintenance, hosting services and professional services.
The Group’s software licences are either perpetual, term
or software as a service (SaaS) in nature. The Group’s
revenue contracts do not include any material future
vendor commitments and thus no allowances for future
costs are made.
The allocation of transaction price to these obligations
is a significant judgement, more details of the nature
and impact of the judgement are included in Note 2.
The identification of the performance obligations within
some multi-element arrangements involves judgement,
however none of the Group’s contracts requires
significant judgement in this regard.
Language Services contracts are typically billed in arrears
on completion of the work with revenue recognised as
accrued income balances. Patent filing contracts are
typically billed in arrears on completion of the work
with revenue recognised as accrued income balances.
The Group’s technology contracts are typically billed in
advance and revenue recognition deferred where the
performance obligation is satisfied over time. The Group’s
contracts for term licenses are recognised upfront when
performance obligations are delivered in the same
manner as a perpetual license sale but, typically, are billed
annually and do not follow the same billing pattern as the
Group’s contracts for perpetual licenses, instead billing
follows more closely that of a SaaS license contract.
Disaggregated information about the Group’s revenue
recognition policy and performance obligations are
summarised below:
Patent Filing Services (IP Services segment)
The Group’s Patent Filing revenue contracts with
customers include a sole performance obligation which is
satisfied at a point in time, being the completion of patent
filing and delivery to the client. Revenue is recognised
when the sole performance obligation is satisfied, which is
when the benefits of control of the services provided are
delivered to the customer.
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Language Services (IP Services, Language Services
and Regulated Industries segments)
The Group’s Language Services contracts with
customers provide for the Group to be reimbursed for
their performance under the contract as the work is
undertaken. Accordingly, as the Group has both the right
to payment and no alternative use for the translated
asset, the Group recognises revenue over time for this
performance obligation.
The Group measures the completeness of this
performance obligation using input methods. The relevant
input method is the cost incurred to date as a proportion
of total costs, in determining the progress towards the
completion of the performance obligation for Language
Services contracts.
Perpetual and term licences (Language and Content
Technology segment)
The Group’s perpetual and term licences are accounted
for at a point in time when the customer obtains control of
the licence, occurring either where the goods are shipped
or, more commonly, when electronic delivery has taken
place and there is no significant future vendor obligation.
The software to which the licence relates has significant
standalone functionality and the Group has determined
that none of the criteria that would indicate the licence
is a right to access apply. In addition, the Group has
identified no other performance obligations under their
contracts for these licences which would require the
Group to undertake significant additional activities which
affects the software. The Group therefore believes the
obligation is right to use the licence as it presently exists
and therefore applies the point in time pattern of transfer.
Transaction price is allocated to licenses using the residual
method based upon other components of the contract.
The residual method is used because the prices of licenses
are highly variable and there is no discernible standalone
selling price from past transactions.
‘SaaS’ licences (Language and Content Technology
segment)
Unlike the Group’s perpetual and term licences, the
Group has identified that there are material ongoing
performance obligations associated with the provision of
SaaS licences. The Group has identified that this creates
a right to access the intellectual property, instead of a
right to use. Accordingly, the associated licence revenue
is recognised over time, straight line for the duration of
the contract. As with other licences, the Group utilises
the residual method to allocate transaction price to these
performance obligations.
NOTES TO THE CONSOLIDATED STATEMENTS
