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IFRIC 18 - Customer Assets

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Transfer of Customer Assets


IFRIC 18 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). In some cases, the entity receives cash from a customer that must be used only to acquire or construct the item of property, plant, and equipment in order to connect the customer to a network or provide the customer with ongoing access to a supply of goods or services (or to do both).

The basic principle of IFRIC 18 is that when the item of property, plant and equipment transferred from a customer meets the definition of an asset under the IASB Framework from the perspective of the recipient, the recipient must recognise the asset in its financial statements. If the customer continues to control the transferred item, the asset definition would not be met even if ownership of the asset is transferred to the utility or other recipient entity.

The deemed cost of that asset is its fair value on the date of the transfer.

If there are separately identifiable services received by the customer in exchange for the transfer, then the recipient should split the transaction into separate components as required by IAS 18. If there is only one component identified, revenue is recognised when the service is performed (which could, for example, be as soon as access to a utility network is provided). IFRIC 18 provides guidance on how to identify the entity's obligation to provide one or more separately identifiable services in exchange for the transferred asset – and, therefore, how to recognise revenue:

  • If the entity has only one service obligation, it would recognise revenue when the service is performed.
  • If the entity has more than one separately identifiable service obligation, it should allocate the fair value of the total consideration received to each service and recognise revenue from each service separately in accordance with IAS 18.
  • If the entity has an obligation to provide ongoing services, the period over which revenue is recognised is generally determined by the terms of the agreement with the customer. If the agreement does not specify a period, the revenue shall be recognised over a period no longer than the useful life of the transferred asset used to
  • provide the ongoing service.

IFRIC 18 also provides guidance on how to account for transfers of cash from customers.

While IFRIC 18 is particularly relevant for entities in the utility sector, it applies to all entities that prepare IFRS financial statements.

Effective Date

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.