Subscriber Acquisition Cost — Non-Capitalized (Prepaid)
Expensing the distribution cost of prepaid SIM activation through dealers — not meeting IFRS 15 capitalization criteria.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Subscriber Acquisition Cost (Expensed) | Expense (+) | 25,000.00 | - |
| Cash / Accounts Payable (Dealer) | Asset/Liability (-) | - | 25,000.00 |
💡 Accountant's Note
Prepaid SIM distribution costs are expensed immediately since there is no long-term contract from which to recover them. Only incremental costs to obtain contracts with expected recovery are capitalized under IFRS 15.
Practitioner & Systems Framework
💻 ERP Architecture
Prepaid SIM distribution costs (dealer activation commissions, SIM card cost, starter pack production) are processed through the AP module and expensed immediately to the subscriber acquisition cost account. The IFRS 15 practical expedient for contracts of 12 months or less also applies — prepaid customers without a minimum term are treated as month-to-month contracts, and the related acquisition costs do not meet the recoverability threshold for capitalisation. The costs are tracked by distribution channel (retail, dealer, online) for SAC analysis.
⚠️ Audit Flags
Auditors confirm that the IFRS 15 capitalisation assessment has been performed and documented for prepaid distribution costs — only costs that are incremental (would not be incurred if the contract was not obtained) and recoverable (expected to be recovered from future contract revenue) qualify for capitalisation. Prepaid costs typically fail the recoverability test due to the absence of a minimum contract term. Test that the expense is recognised in the period of SIM activation, not when the dealer is paid. Review the prepaid SAC trend relative to prepaid gross adds to assess distribution efficiency.
📄 Required Documentation
IFRS 15 CAC capitalisation assessment for prepaid (incremental and recoverability tests), dealer activation commission agreement, SIM card and starter pack cost analysis, SAC expense report by channel, prepaid gross adds data, and SAC-to-ARPU payback period analysis.
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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.