When a few customers contribute much of revenue, growth needs to be read alongside the trading structure. Concentration alone does not predict customer losses or collection failure. The task here is to document the dependence the filing actually discloses.
Official references checked: . The figures below are independently constructed fictional cases, not results of the linked companies.
1. Establish the disclosure’s scope
Record the consolidated scope and period corresponding to total revenue. Paragraph 34 of the publicly accessible NZ IFRS 8, an IFRS-equivalent standard, addresses a single external customer contributing at least 10% of entity revenue without requiring the customer’s name. Preserve anonymous labels such as A and B rather than guessing identities. A threshold or an anonymous label does not establish that no exposure exists.
2. Calculate sales concentration
Assume fictional annual revenue of 500, including 120 from A, 70 from B and 45 from C. Divide each by total revenue: A contributes 24%, B 14% and C 9%. Together they contribute 235, or 47%. Adding them requires an assumption that they are distinct customer groups. Combining a customer’s segment amounts with its group total would double count sales.
| Measure | Customer A | Company total | A share |
|---|---|---|---|
| Annual revenue | 120 | 500 | 24% |
| Receivables at the reporting date | 30 | 60 | 50% |
3. Treat receivable concentration separately
A’s closing receivable of 30 divided by total receivables of 60 is 50%. Investigate why it differs from the 24% annual revenue share by checking terms, shipment timing and collections. Calling 30 / 120 × 365 customer collection days requires further assumptions about credit sales and average balances. A single closing balance does not establish deteriorating credit quality.
4. Do not add direct customers to end demand
A distributor or assembler can be the direct purchaser while another entity is the ultimate user. The MD&A concentration discussion and Note 1 credit-risk disclosure in NVIDIA’s fiscal 2026 10-K illustrate where to look. Direct- and indirect-customer percentages can overlap through the same transactions. Geographic revenue also needs its stated basis: customer headquarters, shipping destination or ultimate use.
5. Label a sensitivity as hypothetical
If A’s sales fall by an assumed 20% while every other customer remains unchanged, revenue falls by 120 × 20% = 24, or 4.8% of company revenue. Assuming a 25% contribution margin on those lost sales and unchanged fixed costs gives a contribution change of −6. This is not a forecast incorporating contract terms, loss probabilities or replacement demand. It is not an estimate of actual net income.
6. Keep evidence for each relationship
| Question | Evidence to retain |
|---|---|
| Same customer group? | Group aggregation and direct/indirect definitions |
| Matching sales and receivable periods? | Annual interval and receivable date |
| Which business segment? | Customer disclosure and segment note |
| What are the collection terms? | Credit terms, aging and allowance discussion |
| Can the relationship change? | Termination, renewal and risk-factor wording |
A long contract does not by itself guarantee collection. Preserve the issuer’s definitions of committed orders, cancellable orders and backlog. Record these separately from recognized sales and concentration percentages.
7. Know when a comparison stops working
Different customer-group definitions or direct/indirect scopes can prevent meaningful rankings across companies. Leave undisclosed figures unavailable rather than filling them with zero. Use the segment guide to separate group and business-unit figures. Before entering the cash conversion calculator, align company-wide revenue, average receivables and a common period.