1 Accounting policies continued Revenue recognition continued Summary continued
Due to the nature of the Group’s activities, the Group transaction price for the majority of its contracts is entirely variable consideration as these contracts are on a time and material basis, using set contractual rates per hour/day worked, giving rise to no estimation or reversal risk at period end. The Group does not have any material obligations in respect of returns, refunds or warranties. The impact of any financing component within contracts with customers has been assessed and concluded to be immaterial. On contract inception, the probability of collectability is assessed across the Group and, unless there is a significant change in facts and circumstances, revenue is recognised. During the year, no instances have been identified where reassessment of the collectability has had to be reassessed, nor have there been any new contracts with customers for which the collection of consideration has not been assessed at inception as probable. This current year assessment also takes into account the impact of Covid-19 on the Group’s customer base. Detailed policies The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers by reportable segments, including significant payment terms, and the related revenue recognition policies. Assurance
Timing of satisfaction of performance obligations and significant payment terms The customer simultaneously receives the benefits of the consulting services provided by the Group over the period over which the work is performed and one promise (performance obligation) is identified. Work is performed on a daily basis. Invoices are raised monthly or based on an agreed invoicing profile with the customer. Invoices are usually payable within 30 days. No discounts or retrospective rebates are provided. Where a set deliverable is required and the customer receives the incremental benefit at the end of the work when the deliverable is transferred to the customer, this represents one performance obligation. In this situation, the contract will have no abortive revenue rights; therefore, the Group has no right to consideration for performance to date. Invoicing will usually be on completion of the set deliverable and payable within 30 days. The customer simultaneously receives and consumes the benefits of the consulting services provided by the Group over the period over which the work is performed by the Group and one performance obligation is identified. Invoices in relation to the abortive revenue will be recognised when aborted. Invoices are usually payable within 30 days.
Revenue recognition policies, including determination of transaction price and rationale Revenue is recognised on an input basis to measure the satisfaction of performance obligations over time. This is done according to the number of days worked in comparison to the total contracted number of days of the performance obligation. The work performed occurs on a daily basis (for example security assessment of a customer’s security environment). It is considered that as the customer benefits over time based on consultants’ time, the input method faithfully depicts the Group’s performance towards complete satisfaction of the single performance obligation. Transaction price is determined by fixed contract rates based upon day rates and number of days. Revenue is recognised at a point in time, on completion of the performance obligation deliverable. It is considered that as the customer benefits once the set deliverable is received, the point in time method faithfully depicts the Group’s performance towards complete satisfaction of the single performance obligation. Transaction price is determined by fixed contract rates.
Revenue stream
Nature
Global Professional Services (GPS)
GPS is the Group’s core consulting service represented by consultants providing cyber security consultancy services to a customer over time or to a set deliverable. Some contracts may contain multiple services (e.g. cyber security assessment and certified product evaluation services). These will be identified as separate performance obligations, and the transaction price allocated to each of these is determined by using the fixed contract rate based upon day rates, being the relative standalone selling price basis. Specifically, the contract terms range from time and materials (based upon consultants’ time and expenses) and discrete statements of work, whereby the customer benefits gradually over the period over which the work is performed, unless there is a set deliverable (for example a defined security assessment report). The Group in certain situations operates on agreed customer terms which allow the Group to recover any abortive revenue from its customer in the event that a customer terminates a contract before the contract or deliverable is complete.
Revenue is recognised on an input basis to measure the satisfaction of performance obligations over time.
This is done according to the number of days worked in comparison to the total contracted number of days of the performance obligation. Transaction price is determined by fixed contract rates based upon day rates and number of consultancy days.
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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