Early Termination Fee (ETF) Income
Charging a fee when a postpaid customer cancels their contract before the minimum term expires.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable (ETF) | Asset (+) | 120.00 | - |
| Early Termination Fee Income | Revenue (+) | - | 120.00 |
💡 Accountant's Note
ETFs recover the unrecouped subsidy and acquisition cost when a customer leaves early. Under IFRS 15, the ETF is recognized when charged since the constraint on variable consideration is lifted at that point.
Practitioner & Systems Framework
💻 ERP Architecture
ETF charges are calculated by the CBS at the time of contract cancellation, based on the contractual ETF schedule (typically a declining amount over the contract term). The charge is raised as a final invoice or applied to the subscriber's final bill. Revenue is recognised immediately as the performance obligation is the right to cancel — a point-in-time event. The contract cost asset (unamortised CAC) is written off simultaneously. The ETF receivable is collected along with any outstanding subscription charges.
⚠️ Audit Flags
Auditors confirm that the ETF amount matches the contractual schedule and has been correctly calculated based on remaining months. Test the collectability of ETF receivables — ETFs are often disputed or difficult to collect from customers who have already ported out. Assess whether an ETF provision is required for expected non-collection. Confirm TRC compliance — Jordan's TRC may cap ETF amounts or specify the calculation methodology. Test that CAC write-off is triggered at the same time as the ETF charge.
📄 Required Documentation
ETF schedule from the subscriber agreement, CBS ETF calculation, ETF invoice, TRC ETF regulatory limit, ETF collection history and provision assessment, CAC write-off journal, and ETF dispute register.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.