Chapters
Annual Report 2020

5. Revenue

Accounting Policy
Revenue from contracts with customers is recognized in the period in which the performance obligation in the underlying contract has been satisfied. In most sales transactions this is at the point in time when control over a product or service has been transferred to the customer. Revenue is shown net of value-added tax, expected returns, rebates, discounts and amounts collected on behalf of third parties. Intercompany revenues within the Group are eliminated.

A contract with a customer may comprise of multiple distinct performance obligations. The total consideration under the contract is allocated to performance obligations based on standalone selling prices. The standalone selling price of products sold is determined based on the retail price. For other performance obligations, experience is used to estimate standalone selling prices. The timing of revenue recognition depends on the type of performance obligation, as described below.

Optical product revenues, including optical subscription arrangements, are recognized when the product is sold to the customer and control over the product has been transferred to the customer in return for a (right to) payment or series of monthly payments. Revenue generally is recognized on the moment of the delivery of the product to the customer. In case of optical subscription arrangements, the revenue for the right of use of spectacles is determined based on the payments to be received until end of the contract and recognized at the time of the sale. Any prepayments by customers are short-term in nature and are not considered revenue but are accounted for as contract liabilities.

Income from optical products related services, including extended (service-type) warranties and commissions on consumer insurances, is recognized based upon the duration of the underlying contracts, over a period of 12 or 24 months. Extended warranties are considered services to be rendered and therefore a distinct performance obligation and included under contract liabilities until revenue is recognized. The Group’s obligation to repair or replace faulty products under the standard warranty terms is recognized as a provision.

Rights issued under a customer loyalty program through vouchers for rebates on future purchases are considered a separate performance obligation and a contract liability is recognized as a reduction to revenue. The standalone selling price of the vouchers is estimated using past experience and the likelihood of redemption. Revenue allocated to the vouchers is recognized based on (anticipated) expiration and when the vouchers are redeemed, generally less than 12 months.

For sales to franchisees and wholesale partners, revenue is recognized upon delivery to the customer, when the risks of obsolescence and loss have been transferred to and the products have been accepted by the customer.

Franchise rights are accounted for as rights to access the franchisor’s intellectual property. Franchise royalties that are based on a percentage of sales are recognized at the time of the sale. Contributions from franchisees are generally recognized based upon the duration of the contractually agreed-upon term.

Revenue is reduced and a refund liability is recognized where the customer has a right to return a product in which the transaction price is refunded. A return asset is recognized and cost of sales is reduced where returns can be resold. Experience is used to estimate such returns at the time of sale.

Supplier allowances are only recognized as revenue if there is no direct relationship with a purchase transaction, otherwise the supplier allowance is deducted from cost of these purchases.

A receivable is recognized when all performance obligations in the contract have been satisfied and payment has become unconditional.

Disaggregation of revenue

Set out below is the disaggregation of the Group’s revenue from contracts with customers per reportable segment in 2020 and 2019, respectively.

Franchise revenues include sales to franchisees and franchise royalties and contributions. Other merchandise revenues comprise mainly wholesale to trade partners. Other revenues comprise mainly supplier allowances and income from subleases.

in thousands of EUR

G4

Other Europe

Americas & Asia

Total

2020

Revenue from contracts with customers

Own store sales

1,822,832

1,086,300

338,781

3,247,913

Franchise revenues

202,594

12,138

2,681

217,413

Other merchandise revenues

66

70

6,461

6,597

2,025,492

1,098,508

347,923

3,471,923

Revenue from other sources

Other revenues

2,779

4,979

1,308

9,066

2,028,271

1,103,487

349,231

3,480,989

2019

Revenue from contracts with customers

Own store sales

2,034,258

1,247,138

484,979

3,766,375

Franchise revenues

227,181

15,090

5,445

247,716

Other merchandise revenues

1,179

65

11,701

12,945

2,262,618

1,262,293

502,125

4,027,036

Revenue from other sources

Other revenues

3,329

6,489

2,452

12,270

2,265,947

1,268,782

504,577

4,039,306

Contract liabilities

Contract liabilities relate to the Group's obligation to deliver future goods and services for contracts with its customers and mainly include prepayments made by customers, vouchers for rebates on future purchases given as part of an initial sales transaction and unfulfilled extended (service-type) warranties.

At 31 December 2020, an amount of €8.3 million (2019: €8.6 million) and €100 million (2019: €90 million) was recognized as non-current and current contract liabilities, respectively. Increase in current contract liabilities mainly related to optical subscriptions arrangements in Sweden and Denmark.

Revenue recognized during 2020 that was included in contract liability at the beginning of the year amounts to €90 million (2019: €77.7 million).

At 31 December 2020, an amount of €29.5 million relates to the transaction price allocated to long-term contract liabilities of unfulfilled extended (service-type) warranties. It is expected that an amount of €21.4 million will be recognized as revenue during 2021 and in an amount of €8.1 million in 2022. All other contract liabilities are for periods of one year or less.