Effective date : June 29, 2018
Responsibility : Executive Vice-President and Chief Financial Officer
This Policy applies to all individuals with assigned responsibility for negotiating and establishing agreements that generate revenue for CBC/Radio-Canada (hereafter “the Corporation”), as well as those responsible for recording and reporting such revenues.
The objectives of this policy and accompanying directives are to ensure that:
- Approval processes with respect to revenue contracts are consistently applied across the organization and in accordance with Policy 2.9.3 Delegation of Signing Authority;
- Consistent parameters are used in negotiating and establishing contracts giving rise to revenue, and any terms outside these parameters are supported by the appropriate approvals;
- Internal controls over financial reporting pertaining to revenue transactions operate consistently;
- Credit risks as they pertain to the corporation’s revenue streams are consistently managed and compliant with Policy 2.3.7 Credit and Collections;
- Accounting for revenue earned from various sources of transactions is compliant with revenue standards under International Financial Reporting Standards (IFRS) and that revenue is recognized when performance obligations are satisfied at the correct amount.
Contract : Any document that binds the Corporation, including undertakings, agreements, work orders, click-through or other online agreements, binding letters of intent, purchase orders, contracts, settlements and releases.
Customer: Defined by IFRS 15 as “a party that has contracted with the Corporation to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration”.
Performance obligation: Defined by IFRS 15 as “a promise to transfer to the customer either (i) a good or service (or a bundle of goods or services) that is distinct; or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Performance obligations do not include activities that the Corporation must undertake to fulfil a contract unless those activities transfer a good or service to a customer.”
Variable consideration: Elements of a transaction price that can vary arising from situations such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties or other similar items. This includes situations where the right to consideration is contingent on the occurrence of a future event.
4. STATEMENT OF POLICY
4.1 Revenue recognition principles
Income arising from the course of the Corporation’s ordinary activities is considered revenue. Revenue is recorded in the general ledger and classified by source of revenue as determined in this Policy by senior management for financial reporting purposes.
The Corporation’s principles of revenue recognition are based on IFRS 15, Revenue from Contracts with Customers.
Revenue is recognized when control of the promised goods and services is transferred to the Corporation’s customers in an amount that reflects the consideration expected in exchange for those goods and services.
4.2 Revenue recognition criteria for the Corporation’s revenue streams
Source of Revenue
How and When Revenue is Recognized
The Corporation offers advertising services through its television and digital platforms. Advertising sales revenue arises from the sale of advertising placements in exchange for monetary and non-monetary compensation, based on published rate cards.
Revenue from the provision of advertising services is recognized at the time the advertising placement has been broadcast or posted online AND when the guaranteed level of audience or ratings has been achieved.
The Corporation provides ongoing delivery of programming to:
Revenue from specialty channels subscriptions is recognized as the Corporation makes its specialty TV signal available to the BDU as required by the contract.
The Corporation enters into agreements for facilities and service rentals with customers in exchange for monetary and non-monetary consideration. These service arrangements generally include the use of the Corporation’s facilities, equipment and labour hours.
The Corporation enters into agreements to sell broadcasting feeds to third party networks and to provide commercial services such as the production of advertising spots to customers in exchange for monetary and non-monetary consideration.
Revenue from facilities and services rentals is recognized over time at the daily rate for each day of service provided.
Sales of Program Licenses
The Corporation enters into program licensing agreements to sell content in the domestic market and overseas. These licenses grant rights to use programs that have either ended (commonly referred to as “syndicated content”) or are still in the process of production (commonly referred to as “current content”) in exchange for monetary or non-monetary consideration.
Licensing revenue is recognized when the content is delivered AND when the license term commences.
The Corporation is entitled to retransmission rights as a copyright owner of radio and television programming retransmitted as distant signals in Canada or overseas.
Retransmission rights are recognized as revenue when provided in accordance with the substance of the relevant agreements.
Contingent fees are recognized when it is highly probable that consideration will be received AND its amount can be determined.
The Corporation provides program sponsorship services to customers such as embedded marketing or product placement in exchange for monetary and or non-monetary compensation
Program sponsorship revenue is recognized once the promised sponsorship service has been provided.
4.3 Credit and collectability assessment
Prior to entering into a revenue contract, a credit assessment for each customer is to be performed in accordance with Policy 2.3.7: Credit and Collections in order to minimize the risk of loss arising from customers with questionable credit quality. The result of the collectability assessment is to be documented and retained on file with the contract. The assessment may vary based on the revenue stream; operational requirements are found in the appropriate revenue directive.
4.4 Revenue contracts
Contracts must be signed by the customer and by the required authorized corporate Representative(s) on behalf of the Corporation, in accordance with Policy 2.9.3: Delegation of Signing Authority and Policy 2.3.6: Procurement.
4.5 Non-standard contracts and contract modifications
The Corporation uses standard contract templates to facilitate revenue contracting. There are exceptional cases where non-standard contracts are entered into. Individual revenue stream directives provide operational requirements on dealing with non-standard contracts or when a contract giving rise to revenue is subsequently amended to modify, add or remove goods and services or to change the contract price. Please refer to section 5 of the policy.
4.6 Transaction price
The transaction price is the consideration, monetary or non-monetary, to which the Corporation is entitled in exchange for the transfer of goods and services, excluding cost recoveries (see section 4.7.1). The consideration may include fixed amounts, variable amounts (referred to as “variable consideration”), or both.
4.7 Related topics
Internal recoveries/chargebacks between internal cost centers or Work Breakdown Structures (WBS) components are not considered to be revenue.
Sales taxes collected from customers are not to be recorded as revenue.
4.7.2 Sale of corporate assets
The proceeds from the sale of corporate assets are used to calculate the gain or loss on the sale of an asset and as such are not recognized as revenue. Refer to Policy 2.3.2 Assets.
4.7.3 Revenue accruals, contract assets and liabilities
Revenue is recorded only when the performance obligations have been satisfied. At the end of each reporting period, all estimated revenue that has been earned, but not billed, is accrued in accordance with the Directive on Manual Journal entries. A receivable is recognized only when the Corporation’s right to consideration is unconditional, except for the passage of time.
A contract asset is recognized when the Corporation has provided a good or service to the customer, but before the consideration is paid or due AND payment is conditional on a future event.
For example, the Corporation has delivered advertising spots but will not be paid until a program sponsorship has been delivered. In this situation, a contract asset is recorded until the program sponsorship has been delivered as is then classified as a receivable until payment is received.
Revenue is not recorded when amounts have been collected, but have not been earned. In such instances, a contract liability is recorded. When performance obligations have been satisfied, revenue is recognised.
This policy is to be read in conjunction with the above definitions used and requirements of the following policies:
- Policy 2.3.2: Assets
- Policy 2.3.6 Procurement
- Policy 2.3.7: Credit and Collection
- Policy 2.9.3: Delegation of Signing Authorities
This policy replaces Policy 2.3.21 : Revenue Recording and Reporting (effective 1999, updated 2003).
All questions pertaining to the interpretation or application of this Policy should be referred to the Office of the Controller or firstname.lastname@example.org.