iQSTEL Inc Revenue Disclosure

Revenue Recognition

 

Telecommunications

 

The Company recognizes revenue related to monthly usage charges and other recurring charges during the period in which the telecommunication services are rendered, provided that persuasive evidence of a sales arrangement exists, and collection is reasonably assured. Management considers persuasive evidence of a sales arrangement to be a written interconnection agreement. The Company’s payment terms vary by client.

 

Usage charges refer to the fees that customers are billed based on their actual usage of the services. For voice services, this typically means charges are based on the duration of calls made. For SMS (text messaging), it usually means charges per message sent. Other recurring charges are referred to charges for services such as (1) Global DIDs, (2) Global Toll-Free Numbers, (3) PBX (Private Branch Exchange) for small businesses, and (4) SIP Trunking. The provision of these services usually has set-up fees and are offered on a subscription or month-to-month basis.

 

Revenue is reported on a gross basis since the Company acts as the principal in the transaction, meaning it has control over the goods or services before they are transferred to the customer. This includes having the primary responsibility for fulfilling the contract and determining the price. With respect to the specific performance obligations of the Company in its contracts with its customers, our standard service agreement establishes the following:

 

	•	The Company agrees to furnish to Customer, and Customer agrees to purchase from the Company, International Long Distance telecommunication services and/or SMS services at the rates agreed to in writing by the Parties.
	•	The Company will provide, operate and maintain communications equipment, international links and network administration and support in the United States and other countries as may be agreed upon.
	•	The Company will be responsible for its own expenses and will provide, operate, and maintain transmission facilities required to link its domestic network with the other Party's nearest point of presence (POP).
	•	The Company shall provide Customer all required IP network addresses, Domain Name Server (DNS) information and, if necessary, the associated prefixes used to exchange voice traffic as provided on the provisioning form.
	•	The Company shall take all appropriate security measures to protect its network from fraudulent traffic coming from unknown or unauthorized sources. Any and all IP and network information received by the Company from Customer for the purposes of this agreement shall be strictly confidential, and disclosed only to those employees or personnel with a need to know.

 

The Company recognizes revenue from telecommunication services in accordance with ASC 606. Topic 606 establishes a comprehensive 5 step framework for determining revenue recognition. Under this framework, the Company considers each service a single performance obligation, since typically, the Company provides a series of distinct services.

 

Under ASC 606, voice and SMS termination services typically qualify for over time recognition because the customer receives and consumes the benefits as the entity performs

 

	•	Each call or message is terminated in real time.
	•	The customer cannot "stockpile" the service — it's consumed instantly.
	•	The service is indivisible and recurring, with no alternative use.

 

Fintech

 

The Company’s primary performance obligation is the transfer of digital prepaid products to customers upon purchase. Revenue is recognized at a point in time when the digital prepaid products are made available to the customer, as this is when the customer obtains control and can benefit from the use of the products. The Company has evaluated additional services, including API integration and technical support, and determined that these services are not distinct performance obligations. These services are highly interdependent and integrated with the primary obligation to deliver digital prepaid products. As such, revenue recognition for these services is bundled with the primary performance obligation and recognized at the same point in time.

 

The transaction price is determined based on the pricing appendix provided to customers at the time of contract signing, with the Company reserving the right to adjust prices with a three-day notice. Since the Company has only one primary performance obligation, there is no allocation of the transaction price across multiple obligations. The application of the 5 step Topic 606 revenue recognition framework to the Company's operations is depicted as follows:

 

Topic 606 Conceptual Framework	Related Company Policy & Procedures
Step 1 Identify the contract(s) with customer	A contract is defined as an approved mutual agreement between the Company and a customer setting performance obligation, and criteria that must be met in accordance with the Company's customary commercial business practices and entered into with the probable expectation that all estimated consideration will be realized in the ordinary course of business.
Step 2 Identify the performance obligations	Performance obligations are identified in the customer agreement, and any subsequent amendments stated in per minute, time and message usage criteria; and digital prepaid products. The Company considers each service a single performance obligation, including instances where the Company provides a series of services that are substantially the same and have the same pattern of transfer.
Step 3 Determine the transaction price	The transaction price is determined at contract inception and is subsequently reviewed periodically to reflect applicable rate amendments, trends in regulatory, market conditions and usage of service and products by a customer. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees.
Step 4 Allocate the transaction price to the performance obligations	The transaction price is allocated to each performance obligation based on the standalone contractual selling price of the time measured service, net of any related discount.
Step 5 Recognize revenue when the entity satisfies a performance obligation	The Company recognizes revenues from contracts with customers when control of the usage of the services and digital prepaid products has been transferred to the customer, as recorded and measured by the Company's internal information systems. Revenues are recognized at the probable amount of consideration expected in exchange for transferring control of usage.