Revenue recognition and mobile phone service providers in Kenya

Abstract

The study examined practices adopted by mobile phone service providers in Kenya in recognition of revenue. The study intended to highlight whether there is any difference in the manner in which the mobile phone service providers recognize their revenue for the different categories of services offered to their customers. The study also intended to determine the extent to which mobile phone service providers comply with the requirements of lAS 18. The study covered the period ending December 2006.

The study was exploratory in nature. A survey was conducted to establish the manner in which mobile phone service providers in Kenya recognize their revenue. The study intended to use census approach in examining three organizations namely Safaricom, Celtel and Telkom, but this was not achieved since Telkom failed to respond to the questionnaire. Data collected from Safaricom and Celtel amounted to 67% which made it possible to generalize the manner in which the mobile phone service providers recognize their revenue. Data was collected through a comprehensive questionnaire which was administered to

respondents. The study used both structured and closed-ended questions. The respondents were accountants who participate in preparation of financial statements in the two mobile phone service providers in Kenya which include Safaricom and Celtel.

In general, the accountants interviewed expressed similar views, suggesting that there are minimal differences in the way mobile phone service providers recognize their revenue. To the accountants, particular issues of relevance to the revenue recognition are heavily borrowed from IFRSs in particular lAS 18. Revenue recognition by mobile phone service providers was not seen as deserving a unique treatment but was treated in the same way as other service industries.