IFRIC 18 on 'customer contributions'
The International Financial Reporting Interpretations Committee has issued IFRIC Interpretation 18 'Transfers of Assets from Customers'.
This Interpretation is particularly relevant for the utility sector. It clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant, and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).
IFRIC 18 addresses:
- The circumstances in which the definition of an asset under the IASB Framework is met
- Recognition of the asset and the measurement of its cost on initial recognition
- Identification of the entity's obligation to provide one or more separately identifiable services in exchange for the transferred asset
- Recognition of revenue when the service obligation(s) is/are performed
- Accounting when the customer transfers cash to acquire an asset instead of transferring a physical asset.
IFRIC 18 must be applied prospectively to transfers of assets from customers received on or after 1 July 2009. Earlier application is permitted provided the valuations and other information needed to apply to the Interpretation to past transfers were obtained at the time those transfers were made.