IFRIC D24 'Customer Contributions' — Redeliberations

Date recorded:

The IFRIC approved an Interpretation based on that exposed in D24 Customer Contributions.


The IFRIC agreed that the title of the Interpretation should be changed to refer to 'transfers' of assets from customers. This is because, in many jurisdictions, 'contributions' are non-reciprocal transactions. The transaction being addressed by this Interpretation is a reciprocal transaction.


Control of an asset

Much of the discussion centred on whether an asset can be recognised by the recipient. The IFRIC was presented with wording revised since the Observer Notes were released. The revised wording concentrates on the definition of an asset in the IASB Framework. The IFRIC concluded that references to IAS 17 and IFRIC 4 were confusing and detracted from the issue being articulated in D24: who controls the asset transferred?

The IFRIC noted that paragraph 49(a) of the IASB Framework states that an asset is a resource 'controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.'

The IFRIC thought that a key indicator of control of an item of property, plant and equipment would be that the entity is responsible for the repair, maintenance, upgrade and replacement of the item transferred.

The IFRIC agreed that if an item of property, plant and equipment received by a service provider meets the definition of an asset, it should be recognised as an asset by the recipient at its transfer date fair value.

Accounting for the credit

The IFRIC agreed that, should the item of property, plant and equipment meet the definition of an asset of the recipient, the credit side of the recognition entry would be a component of revenue.

IFRIC members suggested that the Interpretation should clarify use of the term 'the customer.' Currently, the drafting has been simplified so that 'customer' includes both the entity transferring the item of property, plant and equipment and the entity receiving on-going services through the item transferred. IFRIC members noted that, in many cases, the entity transferring the item of property, plant and equipment will have no further association with the item and that using one term to describe two or more parties might cause more confusion than it was intended to avoid.

Much of the discussion centred on whether that revenue was earned as the result of a single or multiple element transaction. If there was a multiple element transaction, some portion of the revenue would be deferred and amortised over the related service period. However, if there was a single element transaction immediate recognition of revenue would be required.

The IFRIC requested that the Interpretation clarify that what the customer receives (e.g. when an office building is connected to the power grid) is the ongoing access to the distribution network, not the goods or services provided by that network. The goods and services (e.g. electrical power) are usually the subject of a separate transaction between the distributor and the customer. Only when connection to the distribution network is bundled with a preferential rate for the future supply of services would the transaction be treated as a multiple element transaction and unbundled in to its constituent elements.

IFRIC members were concerned that some of the terminology confused this intention, especially in situations in which the distributor had a statutory obligation to supply to all customers connected to its distribution network. The IFRIC agreed that the Interpretation should be clarified to avoid the inference that an obligation would be created by a connexion to a distribution network.

Effective date and transition

The IFRIC agreed that the Interpretation should be effective three months after it is issued. The transition provisions caused more discussion, with some IFRIC members favouring some degree of retrospective application. However, there were others who expressed reservations about this approach on practicability grounds and because of the use of hindsight in determining fair value.

The IFRIC agreed that the Interpretation should apply to transfers of assets within the scope of the Interpretation occurring on or after the effective date (i.e., prospective application only).


The IFRIC discussed whether re-exposure was necessary. Although there have been some significant changes to the consensus, the IFRIC agreed with the staff analysis of the IFRIC's criteria for re-exposure that re-exposure was not necessary. However, the IFRIC staff agreed that they would publicise the post-approval steps to a greater extent than usual, which would delay the issuance of the Interpretation until January 2009 (see next steps, below).


Subject to drafting, the IFRIC approved the Interpretation, with one member dissenting.

Next steps

In response to requests from IFRIC members, the IFRIC staff agreed to:

  • Highlight the release of the 'near-final draft' of the Interpretation on the IASB's Website (in mid-December 2008) for longer than normal. Although this document would not represent an Invitation to Comment, any comments received would be considered by the IFRIC in January 2009.
  • Refer the Interpretation to the IASB for approval in January 2009 (rather than December 2008).

Correction list for hyphenation

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