FRSC Issues for Comment IFRIC Draft Interpretation on Accounting for Customer Contributions
The Financial Reporting Standards Council (FRSC) has issued an Invitation to Comment on IFRIC’s draft Interpretation D24, Customer Contributions.
Customer contributions are transactions in which an entity—the access provider—receives an asset it uses to provide access to an ongoing supply of goods or services to a customer or customers. In some cases, the access provider receives cash which it must use to acquire or construct the asset that will provide access.
IFRIC D24 addresses a number of areas where practice is diverse. It clarifies in particular:
- whether a customer contribution should be recognized as an asset and, if so, whether it should be initially recognized at cost or fair value;
- whether an agreement to provide ongoing services using a contributed asset contains a lease;
- how to account for the credit that arises from the recognition of a customer contribution at fair value;
- how to account for a cash contribution.
If adopted, IFRIC D24 will standardize practice and clarify the accounting for the receipt of customer contributions. All access providers will be required to recognize contributed assets and revenue from providing access to a supply of goods or services over the period access is provided. Those access providers that have previously not recognized contributed assets will now recognize increased property, plant and equipment and revenue. Those access providers that have previously recognized revenue immediately on the receipt of a contributed asset may now be required to recognize it over a longer period. The IFRIC proposes that its guidance be applied prospectively.
The FRSC Invitation to Comment and IFRIC D24 may be downloaded from the Philippine Financial Reporting Standards (PFRS) website, within the PICPA website (www.picpa.com.ph). IFRIC D24 may also be downloaded from the IASB website (www.iasb.org).
The FRSC invites comments on the IASB ED by April 11, 2008 to enable the Council to consider and include comments from Philippine respondents in its response to the IASB.