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IFRS Guide > IFRIC 18

IFRIC Accounting for transfers of assets from customers

The International Financial Reporting Interpretations Committee (IFRIC) issued additional guidance on the accounting for transfers of assets from customers, IFRIC 18, “Transfers of Assets from Customers.” The interpretation applies heavily to the utility sector. The standard clarifies the requirements of International Financial Reporting Standards (IFRSs) for agreements that a company receives from a customer an item of property, plant and equipment. The company must use this item of PP&E to connect the customer to a network or provide ongoing access to a supply of goods or services – normally defined as a supply
of water, gas, or electric. Sometimes a company receives cash from a customer which must be used to acquire or construct the property, plant and equipment.

IFRIC 18 clarifies:
1. the circumstances in which the definition of an asset is met;
2. the recognition of the asset and the measurement of its cost on initial recognition;
3. the identification of the separately identifiable services (one or more services in exchange
for the transferred asset),
4. the recognition of revenue;
5. the accounting for transfers of cash from customers.

The IFRIC simplified the guidance on the recognition of an asset by referring to the IASB’s Framework and added additional guidance on the recognition of revenue.