Revenue Recognition

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition
1812 Revenue Recognition

August 2010 ISA 500, ISA 240, DAAM 2815 ISA 500 (periods starting on or after 15 December 2009) ISA 240 (periods starting on or after 15 December 2009)
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Date Issued/Date of last review: Literature: Effective date of literature:
GUIDANCE Presumed significant risk - Revenue recognition
"When identifying and assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there are ri assertions give rise to such risks. Paragraph 47 specifies the documentation required where the auditor concludes that the presumption is no revenue recognition as a risk of material misstatement due to fraud. [ISA 240.26] If the auditor has concluded that the presumption that there is a risk of material misstatement due to fraud related to revenue recognition is documentation the reasons for that conclusion. [ISA 240.47]
"The auditor shall treat those assessed risks of material misstatement due to fraud as significant risks and accordingly, to the extent not alre including control activities, relevant to such risks." [ISA 240.27]
ISA240 creates a responsibility on auditors to presume a fraud risk exists around revenue recognition at the outset of each engagement an Our understanding of the process to identify and record revenue transactions, the revenue recognition policies and risks of material missta
This work paper highlights each revenue stream, the significant fraud risks related to each revenue stream, and where appropriate allows f not significant and are not expected to be significant, are excluded, as these are not risk areas where fraud could cause material misstatem tab).
Risks of fraud - Revenue Recognition

The "Application and Other Explanatory Material" to ISA 240 provides the following guidance:
A28. Material misstatement due to fraudulent financial reporting relating to revenue recognition often results from an overstatement of rev may result also from an understatement of revenues through, for example, improperly shifting revenues to a later period. A29. The risks of fraud in revenue recognition may be greater in some entities than others. For example, there may be pressures or incentive recognition in the case of listed entities when, for example, performance is measured in terms of year over year revenue growth or profit. Sim entities that generate a substantial portion of revenues through cash sales. A30. The presumption that there are risks of fraud in revenue recognition may be rebutted. For example, the auditor may conclude that ther where a there is a single type of simple revenue transaction, for example, leasehold revenue from a single unit rental property.
Steps in work paper completion

1) Conduct the relevant discussions with engagement team, management and those charged with governance. 2) Perform preliminary analytical review procedures to identify risks relating to revenue recognition. 3) Obtain an understanding of the relevant accounting policies and processes to account for revenue. 4) Pinpoint risks identified to relevant revenue stream, type of transaction and assertion.
Econet Wireless Global Limited Group - 28 February 2012 Period End: 28/02/2012
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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 2/37
after 15 December 2009) after 15 December 2009)
fraud, the auditor shall, based on a presumption that there are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or required where the auditor concludes that the presumption is not applicable in the circumstances of the engagement and, accordingly, has not identified 40.26] terial misstatement due to fraud related to revenue recognition is not applicable in the circumstances of the engagement, the auditor shall include in the audit
o fraud as significant risks and accordingly, to the extent not already done so, the auditor shall obtain an understanding of the entitys related controls,
round revenue recognition at the outset of each engagement and to consider these risks before designing tests to address the risks of material misstatement. ons, the revenue recognition policies and risks of material misstatement around revenue recognition, is documented in <XXXX>.
related to each revenue stream, and where appropriate allows for a rebuttal of the presumption that revenue is a significant risk. Revenue streams that are e are not risk areas where fraud could cause material misstatement. This however must be documented clearly with supporting arguments (refer 'Pinpointing'
ollowing guidance:
o revenue recognition often results from an overstatement of revenues through, for example, premature revenue recognition or recording fictitious revenues. It improperly shifting revenues to a later period. es than others. For example, there may be pressures or incentives on management to commit fraudulent financial reporting through inappropriate revenue measured in terms of year over year revenue growth or profit. Similarly, for example, there may be greater risks of fraud in revenue recognition in the case of
may be rebutted. For example, the auditor may conclude that there is no risk of material misstatement due to fraud relating to revenue recognition in the case asehold revenue from a single unit rental property.
and those charged with governance.
1. Discussions 2. Prelim AR 3. Understanding 4. Pinpointing
ng to revenue recognition.
es to account for revenue.
and assertion.
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pes of revenue, revenue transactions or and, accordingly, has not identified
nt, the auditor shall include in the audit
g of the entitys related controls,
ress the risks of material misstatement. n <XXXX>.
nificant risk. Revenue streams that are supporting arguments (refer 'Pinpointing'
nition or recording fictitious revenues. It
rting through inappropriate revenue d in revenue recognition in the case of
ting to revenue recognition in the case
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DISCUSSIONS WITH ENGAGEMENT TEAM, MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE Engagement team
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The ISA's require that the engagement partner and other key engagement team members discuss the susceptibility of the entitys financial
Key considerations and questions that the practitioner can include into these discussions include: These discussions should ordinarily take place during the Planning Meeting. Procedures 1. Has the entity experienced any errors in the past with recognising revenue?
2. Does the industry the entity operates in have any experience of revenue recognition problems?
3. Are the terms of the entitys sales contracts simple or complicated? 4. Is the entitys accounting policy appropriate for the types of revenue generated by the entity, and is it in accordance with the relevant accounting framework (or other authoritative guidance)? 5. Are there any particular pressures or opportunities for management to manipulate revenue? 6. How easy would it be for management to manipulate revenue, and how would they do it?
7. Which assertions and / or types of revenue are more likely to be at risk of manipulation of revenue recognition? 8. Any other relevant matters.
Management
The auditors responsibilities relating to fraud in an audit of financial statements require that the practitioner make inquiries of manageme Make inquiries of management regarding: Form <1211> "Perform Fraud Inquiries" is recommended as a best practice template and discussion tool. Procedures
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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

1. Managements assessment of the risk that the financial statements may be materially Revenue recognition
misstated due to fraud, including the nature, extent, and frequency of such assessments. [ISA 240.17(a)] 2. Managements process for identifying and responding to the risks of fraud in the entity, including any specific risks of fraud that management has identified or that have been brought to its attention, or classes of transactions, account balances, or disclosures for which a risk of fraud is likely to exist. [ISA 240.17(b)] 3. Managements communication, if any, to those charged with governance regarding its processes for identifying and responding to the risks of fraud in the entity. [ISA 240.17(c)] 4. Managements communication, if any, to employees regarding its views on business practices and ethical behaviour. [ISA 240.17(d)]
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Those charged with governance
The auditors responsibilities relating to fraud in an audit of financial statements require that the practitioner make inquiries of those charg Perform the following procedures: Form <1211> "Perform Fraud Inquiries" is recommended as a best practice template and discussion tool. Procedures 1. Unless all of those charged with governance are involved in managing the entity, the auditor shall obtain an understanding of how those charged with governance exercise oversight of managements processes for identifying and responding to the risks of fraud in the entity and the internal control that management has established to mitigate these risks. [ISA 240.20] 2. Unless all of those charged with governance are involved in managing the entity, the auditor shall make inquiries of those charged with governance to determine whether they have knowledge of any actual, suspected or alleged fraud affecting the entity. These inquiries are made in part to corroborate the responses to the inquiries of management. [ISA 240.21]
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AND THOSE CHARGED WITH GOVERNANCE
ent team members discuss the susceptibility of the entitys financial statements to material misstatement and the application of the applicable financial reporting frame
o these discussions include: Details Based on our knowledge and understanding of the entity, errors in revenue has been identified.
The Telecommunications industry has experienced issues in revenue recognition. In June 2010, the IASB1 and the FASB2 published an exposure draft ("ED")on revenue from contracts with customers, which comprises proposals to replace existing guidance under both IFRSs and US GAAP. The ED proposes a single principles-based model under which an entity would recognise revenue as it satisfies the performance obligations in contracts with customers. A performance obligation would be satisfied when control of the promised goods or services is transferred to the customer. As per our knowledge and understanding of the entity, the sales contracts are complicated as it is based on international carrier agreements. The accounting policies has been reviewed as part of our tie-in of the notes.
Econet has intentions of listing on the London Stock exhange and this created pressure on management to manilpulate revenue. The following manipulation could occur: > certain tariffs loaded on the system are not in accordance with the agreed tariffs > inappropriate / premature / incomplete recognition of revenue > not recording the revenue in terms of IFRS for each significant revenue stream > interconnect revenue (Zimbabwe): invalid of revenue post non payment by other operators, inaccuracy of the receivables balance and the allowability of the tax deduction > incompleteness of switch data Occurrence, cut-off, classification, completeness and accuracy None noted.
tements require that the practitioner make inquiries of management [ISA 240.17-.19] .
tice template and discussion tool. Details
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Low risk as it is not considered likely to occur at a head office level. Revenue recognition
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Maintenance of regular review and adherence to authorization limits / processes as per chart of authority.
Maintenance of regular review and adherence to authorization limits / processes as per chart of authority. Maintenance of regular review and adherence to authorization limits / processes as per chart of authority.
tements require that the practitioner make inquiries of those charged with governance [ISA 240.20-.21] .
tice template and discussion tool. Details Maintenance of regular review and adherence to authorization limits / processes as per chart of authority.
Those charged with governance are not aware of any actual, suspected or alleged fraud affecting the entity.
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t and the application of the applicable financial reporting framework to the entitys facts and circumstances. [ISA 240.15] .
Comments Example of errors identified in prior years were as follows: > error in posting income to other revenue instead of accrued purchases > errors in recognition of deferred revenue The above errors are not considered intentional and in addition, they are not considered material and were unlikely to result in a material mistatement of the financial statements. The revenue recognition problems has prompted the IASB and FASB to publish an exposure draft. Revenue recognition has been identified as a significant risk <1210> and adequate audit procedures has been designed in <1810>.
Revenue recognition has been identified as a significant risk <1210> and adequate audit procedures has been designed in <1810>. The accounting policies has been reviewed as part of our tie-in of the notes. The acocunting policy appears to be inline with IFRS. As a result of the potential listing, the audit has been classified as greater than normal<1250>. Revenue has been identified as a significant risk and adequate audit procedures has been designed in <1810>. We have identified these as significant risks <1210> and adequate audit procedures has been designed in <1810>.
We have identified these as significant risks <1210> and adequate audit procedures has been designed in <1810>. None noted.
Comments
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Please refer to <1211> where discussions held with management (Lesley Mills - Head of Group Revenue recognition Financial Reporting) has been documented.
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Please refer to <1211> where discussions held with management (Lesley Mills - Head of Group Financial Reporting) has been documented.
Please refer to <1211> where discussions held with management (Lesley Mills - Head of Group Financial Reporting) has been documented. Please refer to <1211> where discussions held with management (Lesley Mills - Head of Group Financial Reporting) has been documented.
Comments Please refer to <1211> where discussions held with those charged with governance (Marlisa Harris - Group CFO) has been documented.
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Please refer to <1211> where discussions held with those charged with governance (Marlisa Harris - Group CFO) has been documented.
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PRELIMINARY ANALYTICAL REVIEWS
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The auditor shall evaluate whether unusual or unexpected relationships that have been identified in performing analytical procedures, in
Materiality
10,000,000
1 Obtain an understanding of the risk of fraud relating to revenue recognition by looking at the following prelimin
Note: Complete the white cells with the relevant information and then evaluate the results.
# 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Revenue stream Monthly access Usage airtime Interconnect - local Interconnect - international Roaming SMS Commercial payphones Traffic - wholesale Traffic - retail accounts Bandwidth Phonecards Service fees Product support and maintenance Commission Equipment sales Sim cards POS sales Sales discounts Data (internet) VSAT Fibre IP Transit Other TOTAL REVENUE As per revenue per Preliminary AR <1610> Difference
Type of revenue stream Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from sale of goods Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered Revenue from services rendered
Revenue from services rendered Revenue from sale of goods
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been identified in performing analytical procedures, including those related to revenue accounts, may indicate risks of material misstatement due to fraud. [ISA 240.22
<1710>
ognition by looking at the following preliminary analytical and information:

Materiality CY revenue balance 10,226,229 499,224,919 46,289,797 278,345 9,579,663 49,651,116 380,897 124,343,699 150,102 3,974,488 310,312 265,569 2,193,830 162,622 591,771 2,947,010 5,998,207 5,998,207 29,320,062 2,089,575 2,160,719 3,410,980 30,023,739 829,571,858 -775,331,017 54,240,841 ! % of total 1% 60% 6% 0% 1% 6% 0% 15% 0% 0% 0% 0% 0% 0% 0% 0% 1% 1% 4% 0% 0% 0% 4% 100% PY revenue balance 9,010,540 392,455,102 44,195,029 221,624 9,747,845 54,242,758 151,851 102,372,577 173,373 9,484,811 1,121,998 74,701 1,291,371 139,266 996,091 3,280,277 3,261,760 (38,450,083) 9,909,950 % of total 1% 62% 7% 0% 2% 9% 0% 16% 0% 2% 0% 0% 0% 0% 0% 1% 1% n/a 2% n/a n/a n/a 4% 106% Revenue changes CY > Materiality Yes Yes Yes No No Yes No Yes No No No No No No No No No No Yes No No No Yes Increase/ (decrease) from PY 1,215,689 106,769,817 2,094,768 56,721 -168,182 -4,591,642 229,046 21,971,122 -23,271 -5,510,323 -811,686 190,868 902,459 23,356 -404,320 -333,267 2,736,447 44,448,290 19,410,112 2,089,575 2,160,719 3,410,980 4,088,392
25,935,347 629,616,188
828,980,087 [Formula] 591,771 [Formula]
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ks of material misstatement due to fraud. [ISA 240.22]
Movement % 13% 27% 5% 26% -2% -8% 151% 21% -13% -58% -72% 256% 70% 17% -41% -10% 84% -116% 196% 0% 0% 0% 16%
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{b}
{c} {d}
{e}
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UNDERSTANDING THE REVENUE FLOW OF TRANSACTIONS
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Perform an assessment of each revenue stream against relevant Accounting pronouncements (IAS 18, IAS 11, IAS 39, IFRS for SME's, GRAP
The practitioner needs a detailed understanding of the different revenue transaction types, related accounting policies and the process foll
Revenue stream
1 Monthly access
2 Usage airtime
3 Interconnect - local
4 Interconnect - international
5 Roaming
6 SMS
7 Commercial payphones
8 Traffic - wholesale
9 Traffic - retail accounts
10 Bandwidth
11 Phonecards
12 Service fees
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13 Product support and maintenance Revenue recognition
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14 Commission
15 Equipment sales
16 Sim cards
17 POS sales
18 Sales discounts
19 Data (internet)
20 VSAT
21 Fibre
22 IP Transit
23 Other
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relevant Accounting pronouncements (IAS 18, IAS 11, IAS 39, IFRS for SME's, GRAP 9, GRAP 11, GRAP 23, GRAP 104) definitions and criteria to assess if there is complia
ifferent revenue transaction types, related accounting policies and the process followed to initiate, authorise, record, review and disclose the various revenue transact
Reference to understanding
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r SME's, GRAP 9, GRAP 11, GRAP 23, GRAP 104) definitions and criteria to assess if there is compliance with the accounting standards and how and when revenue is be
he process followed to initiate, authorise, record, review and disclose the various revenue transactions.
Document the relevant accounting policy applied by the entity based on understanding and prior year knowledge <Revenue Accounting Policy> TAB
Assessment against relevant framework
This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team.
<Revenue Accounting Policy> TAB
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<Revenue Accounting Policy> TAB Revenue recognition This will be tested at Component level and any issues 1812: 18/37 identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team. This will be tested at Component level and any issues identified will be reported to the group audit team.
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ting standards and how and when revenue is being recognised.
Is the accounting policy Included significant risk in line with the relevant on <Pinpointing> tab framework? Yes Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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Yes Revenue recognition Yes
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Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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PINPOINTING THE RISK OF FRAUD RELATING TO REVENUE RECOGNITION Approach
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1 For each material revenue stream, consider and identify the significant risk(s) of material misstatement due to fraud, in the following t If the audit team has not identified a significant risk related to a revenue stream, we should document the reasons and evidence to sup Note: A filter can be used to display only material revenue streams by selecting "Yes" in C11 once <Prelim AR> tab has been completed 2 For each significant risk that has been identified, determine if there is a mitigating control and test the design and implementation of t 3 Is the control identified sufficient (direct and precise enough) to place reliance for testing the operating effectiveness of the control an If YES, perform the applicable level of substantive analytical procedures (DAAM 5200) or substantive test of details (DAAM 5410). If NO, perform specifically responsive tests, including tests of details to address the significant risk. (ISA 330.21)
[Link]
[Link]
Revenue Streams Revenue from services rendered
Amount 828,980,087
Material? Yes
Revenue from sale of goods
591,771
No
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of material misstatement due to fraud, in the following table. Link each significant risk to the relevant assertion(s). m, we should document the reasons and evidence to support our conclusions. [ISA 240.47] g "Yes" in C11 once <Prelim AR> tab has been completed. ting control and test the design and implementation of the control. e for testing the operating effectiveness of the control and reducing the extent of substantive procedures? M 5200) or substantive test of details (DAAM 5410). s the significant risk. (ISA 330.21)
Step 1 Is there a significant risk related to revenue stream? Yes
No
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to fraud, in the following table. Link each significant risk to the relevant assertion(s). easons and evidence to support our conclusions. [ISA 240.47] R> tab has been completed. gn and implementation of the control. ectiveness of the control and reducing the extent of substantive procedures? details (DAAM 5410). .21)
Step 1 Description of significant risk / Document reasons why no significant risk related to revenue recognition has been identified Accuracy of tarrifs - Certain tariffs loaded on the system are not in accordance with the agreed tariffs. The audit team should compare the agreed tariffs to the system tariffs and the related impact on revenue. Revenue recognition - Audit teams should consider the inappropriate / premature / incomplete recognition of revenue. Audit teams should consider the inaccurate revenue and deferred revenue computations. Revenue recognition - Assess that the revenue has been correctly recorded in terms of IFRS for each significant revenue stream. Also assess the exitance of multi deliverable contracts, and the appropriate accounting treatment for these contracts. Interconnect revenue - Audit teams should consider the accounting treatment and net-off of international interconnect revenue with cost of sales. Interconnect revenue (Zimbabwe) - Audit teams should consider: - The validity of the revenue post non payment by other operators - the accuracy of the receivables balance - the allowability of the tax deduction Completeness of switch data - Ensure that revenue from the swithch is recorded in the billing system Significant portions of the revenue are related party transactions and needs to be eliminated on consolidatilon
No significant risks related to revenue recognition has been identifed as it is unlikely that material mistatements will occur as the amount of total revenue from sale of goods is less than materiality of USD 10 000 000 <1710>.
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<1810> Step 2 Pinpoint risk to relevant assertion(s) Occurence Cut off Classification Occurence Cut off Classification Occurence Cut off Classification Occurence Cut off Classification Occurance Accuracy Control identified that address significant risk Control activities will be identified at component level Control activities will be identified at component level Control activities will be identified at component level Control activities will be identified at component level Control activities will be identified at component level Control sufficient to result in OE? No
No
No
No
No
Occurence Completeness Classification Classification Accuracy
Control activities will be identified at component level Hyperion keeps a list of all the related parties transactions and eliminates them on consolidation at component level n/a
No No
n/a
No
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Step 3
Select the relevant response Perform specifically responsive tests to address significant risk Perform specifically responsive tests to address significant risk Perform specifically responsive tests to address significant risk Perform specifically responsive tests to address significant risk Perform specifically responsive tests to address significant risk
Perform specifically responsive tests to address significant risk Perform specifically responsive tests to address significant risk
Perform specifically responsive tests to address significant risk
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Step 3
Ref to testing Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Testing will be performed at component level and any issues will be reported to Group auditors. The impact of these issues will be assessed at Group level. Intercompany matrix will be obtained that will include all the intercompany amounts and we will ensure that all the intercompany transactions agree to the signed packs and that all the intercompany amounts are eliminated
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Revenue recognition
The main categories of revenue and bases of recognition for the group are: Contract products Connection fees Revenue is recognised on the date of activation. Access charges Revenue is recognised in the period to which it relates.
Contract products continued Airtime Revenue is recognised on the usage basis. Telephone and leased line rentals Revenue is recognised on an accrual basis. Metered calls Revenue is recognised on the usage basis Pre-paid products Airtime
Starter packs Revenue is recognised on the date all risks and rewards associated with the starter-packs are transferred to the purchaser.
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Internet services Subscriptions Subscriptions revenue is recognised on a straight-line basis over the period to which it relates. Services Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Automated transaction services Software and hardware sales Revenue is recognised when goods are delivered and ownership has passed. Service revenues Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Other revenue and income Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Services Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Interest income
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Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established.
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Please note: The following Accounting policy has been obtained from prior years workingpapers in which the group accounting policies were disclosed in line with that implemented by companies in the EWG Group. Inspected the current year annual financial statements and noted that the revenue policy are consistent with the prior year Revenue recognition Revenue, which excludes sales taxes, cash discounts and sales between group companies, represents the invoiced value of goods and services supplied by the group. The group measures revenue at the fair value of the consideration received or receivable. Revenue is recognised only when it is probable that economic benefits associated with the transaction will flow to the group and the amount of revenue and associated costs incurred, can be measured reliably. If necessary, revenue is split into separately identifiable components. The Group operates a Bonus Points customer loyalty program in which its subscribers earn points for particular activity on the Groups network. The bonus points accumulated by subscribers can then be redeemed in exchange for free products, subject to a minimum number of points being obtained.
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The Group accounts for award points as a separately identifiable component of the sales transaction in which they are granted and the fair value of the consideration received from the customer is allocated between the award points and other components of the sale. The fair value of the award points is determined by applying a statistical analysis but is deferred and recognised as revenue only when the points are redeemed and the Groups obligations have been fulfilled. The main categories of revenue and bases of recognition for the group are: Contract products Connection fees Revenue is recognised on the date of activation. Access charges Revenue is recognised in the period to which it relates.
Contract products continued Airtime Revenue is recognised on the usage basis. Telephone and leased line rentals Revenue is recognised on an accrual basis. Metered calls Revenue is recognised on the usage basis Pre-paid products Airtime Revenue is recognised when a customer utilises the airtime, at which point the risks and rewards have been transferred. Upon purchase of an airtime voucher the customer receives the right to make outgoing voice calls and to use the short message service to the value of the voucher. Revenue is deferred until such time as the customer uses the airtime, or the credit expires. Starter packs Revenue is recognised on the date all risks and rewards associated with the starter-packs are transferred to the purchaser.
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Internet services Subscriptions Subscriptions revenue is recognised on a straight-line basis over the period to which it relates. Services Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Automated transaction services Software and hardware sales Revenue is recognised when goods are delivered and ownership has passed. Service revenues Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Other revenue and income Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Services Revenue is recognised on the accrual basis in accordance with the substance of the agreement. Interest income Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
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Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established.
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Assertion
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Classes of transactions Account balances Presentation and disclosure
1. Occurrence 2. Completeness 3. Accuracy 4. Cut-off 5. Classification
1. Existence 2. Rights and obligations 3. Completeness 4. Valuation and allocation
1. Occurrence and rights and obligations 2. Completeness 3. Classification and understandability 4. Accuracy and valuation
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Target Revenue recognition (775,331,017) Source Ref (775,331,017) 1610 Source Document Name Perform Preliminary Analytical Procedures
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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue Agree recognition

!
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Tickmarks
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{b}
As per discussion with Lesley Mills (Head of Group Financial Reporting), usage airtime has increased mainly as a result of an increase in Econet Wireless Zimbabwe Ltd revenue of USD104 million. Corroborated by inspection of the key indicators for February 2012 and noted the following: > number of subscribers connected increased from 5 509 988 (2011) to 6 409 480 (2012) (increase of 16%) > number of active subscribers increased from 4 800 773 (2011) to 5 576 775 (2012) (increase of 16%) Therefore, accept the revenue increase of 26% as reasonable. As per discussion with Lesley Mills (Head of Group Financial Reporting), the increase of USD21.9 million relate to an increase in Liquid as a result of an increase in the total traffic carried by the company as evidenced by the total increase in minutes for the current year at 539 532 628 (total minutes). Therefore, accept therevenue increase of 21% as reasonable.
{b}
{c}
{c} {d} As per discussion with Lesley Mills (Head of Group Financial Reporting), due to the expansion of fibre optic capacity in Zimbabwe, as noted in tickmark {e}, this has resulted in a decrease in Bandwidth revenue as fibre optic cables represents a faster mode of communication and a better product in comparison to Bandwidth communication. This is inline with our expectations and can be accepted as reasonable. {d} {e} As per our knowledge and understanding of the business, Liquid has increased in capacity by expanding its fibre optic cables in Zimbabwe. This has resulted in an increase of USD19 million. As per discussion with Lesley Mills (Head of Group Financial Reporting), revenue has increased substantially from September 2011 onwards due to the increase in capacity. Accept as reasonable. {e}
10/12/2013 1:56 AM

Revenue Recognition

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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition

1812 Revenue Recognition

Date Issued/Date of last review: Literature: Effective date of literature:

GUIDANCE Presumed significant risk - Revenue recognition

Risks of fraud - Revenue Recognition

Steps in work paper completion

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 2/37

after 15 December 2009) after 15 December 2009)

and those charged with governance.

1. Discussions 2. Prelim AR 3. Understanding 4. Pinpointing

es to account for revenue.

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 3/37

pes of revenue, revenue transactions or and, accordingly, has not identified

nt, the auditor shall include in the audit

g of the entitys related controls,

ress the risks of material misstatement. n <XXXX>.

nition or recording fictitious revenues. It

rting through inappropriate revenue d in revenue recognition in the case of

ting to revenue recognition in the case

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

Those charged with governance

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AND THOSE CHARGED WITH GOVERNANCE

tice template and discussion tool. Details

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 8/37

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition

PRELIMINARY ANALYTICAL REVIEWS

Revenue from services rendered Revenue from sale of goods

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 11/37

ognition by looking at the following preliminary analytical and information:

828,980,087 [Formula] 591,771 [Formula]

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition 1812: 12/37

ks of material misstatement due to fraud. [ISA 240.22]

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition

UNDERSTANDING THE REVENUE FLOW OF TRANSACTIONS

9 Traffic - retail accounts

Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012 Revenue recognition

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Assessment against relevant framework

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Preparer: CG 28/03/2012 Reviewer: AK 26/04/2012

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