The IFRIC continued its deliberations on how an entity should account for the receipt of a customer contribution. Such contributions arise when a customer provides an asset to a service provider that is then used to provide access to a supply of goods or services to the customer.
The IFRIC first considered how a service provider should account for the receipt of cash that must be used to construct or acquire an asset that is then used to provide access to a supply of goods or services to the customer. The IFRIC noted that, having received a cash contribution, the service provider is obliged to provide ongoing access to a supply of goods or services. Constructing an item of property, plant and equipment to use to provide that ongoing access is an integral part of providing access to the customer. The construction is not a separate service to the customer and so does not result in the recognition of revenue.
The IFRIC therefore concluded that because the customer contributes cash to obtain ongoing access to a supply of goods or services, it should be recognised as revenue as that access is provided. In reaching this conclusion, the IFRIC considered whether the arrangement comprised two transactions for the customer — one being the acquisition of an asset in return for cash and the other being the acquisition of access to a supply of goods or services in return for the contribution of the asset. The IFRIC rejected this view on the basis that the asset acquired or constructed by the service provider remains its own asset for use in providing the customer with access to a supply of goods or services. It does not become an asset of the customer.
The IFRIC then considered a draft Interpretation it had asked the staff to prepare. The IFRIC reaffirmed its previous tentative decisions that:
- an entity that receives a contributed asset should first assess whether it has received an asset that it should recognise in accordance with IFRSs.
- if the entity has received an asset that it should recognise, that asset should be measured at fair value.
- the entity should apply IFRIC 4 to assess whether the ongoing service arrangement contains a lease of the asset back to the customer. If so, and the lease is a finance lease, the entity might conclude that its obligation to provide access to a supply of goods or services has been settled by the transfer of the asset to the customer.
- the credit that arises from recognising the asset at fair value represents an obligation to provide ongoing access to a supply of goods or services using that asset. Revenue should be recognised and the obligation reduced as access is provided.
- the period over which the access is provided is the period when the entity has an obligation (legal, contractual or otherwise) to provide access to the supply of goods or services.
The IFRIC concluded that the draft Interpretation prepared by the staff should be published for comment, subject to drafting changes.