Urbanise.com Annual Report 2019

2. Significant accounting policies (continued) Platform licence and activation fees The Group’s hosted Software-as-a-Service (“SaaS”) application, which allows customers to use hosted software over the contract period without taking possession of the software, is provided on a subscription basis, and recognised over time (rateably over the contract period) on a straight-line basis, because the customer simultaneously receives and consumes the benefits, commencing on the date an executed contract exists and the customer has the right-to-use and access to the platform. Activation fees (in respect of migration of data) are recognised over time (as and when access to the platform is provided to the customer) using an input method to measure progress towards complete satisfaction of the performance obligation. The normal credit term is 30 to 90 days upon invoice date. Throughout the contract, Urbanise has an enforceable right to payment for performance to date. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated based on their standalone selling price (“SSP”). In determining the transaction price for each performance obligation, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any). (i) Variable consideration If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for providing access to the software to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. (ii) Volume discounts Revenue is constrained and the Group provides volume discounts to certain customers once the quantity of licences purchased during the period exceeds a threshold specified in the contract. The Group has certain contracts whereby the license fee changes based on a tiered pricing schedule. In these contracts, any variable consideration (lower prices for increased volumes), is allocated to the period in which the revenue relates. Variable consideration is constrained; and the group does not estimate this variable consideration in advance of the variability being resolved as the incremental fees attributable to additional volumes are recognised in the reporting period when the new volumes are activated. Professional services Professional services are typically billed on a time and material basis and revenue is recognised over time, using an input method to measure progress towards complete satisfaction of the performance obligation, as the services are performed. For professional services contracts billed on a fixed price basis, revenue is recognised over time based on the proportion of services performed. The Group recognises revenue from professional services over time, using an input method based on hours incurred to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group. In general, the Company’s professional services are capable of being distinct as they could be performed by third party service providers or self-delivered by the customer, and do not involve significant customization of the hosted software. Sale of equipment Revenue from sale of equipment is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment. The normal credit term is 30 to 90 days upon delivery. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g., licence fee, activation fee). In determining the transaction price for the sale of equipment, the Group considers the effects of variable consideration, non-cash consideration, and consideration payable to the customer (if any). Notes to the Consolidated Financial Statements for the year ended 30 June 2019 (continued) 41