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Manual of Accounting – IFRS for the UK 2014

Separation of components


Manual of Accounting – IFRS for the UK 2014

Global Accounting Consulting Services, PricewaterhouseCoopers LLP
Bloomsbury Professional
Publication Date:
9.131 A transaction may contain separately identifiable components that should be accounted for separately. IAS 18 states that, it is necessary to apply the revenue recognition criteria to each separately identifiable component of a single transaction in order to reflect the transaction’s substance. IAS 18 gives an example of a product sold with an obligation for subsequent servicing and states that the amount attributable to the subsequent servicing should be deferred and recognised over the period during which the service is performed. [ IAS 18 para 13 , App para 11]. 9.132 In assessing the transaction’s substance, the transaction should be viewed from the perspective of the customer and not the seller: that is, what does the customer believe they are purchasing? If the customer views the purchase as one product, then it is likely that the recognition criteria should be applied to the transaction as a whole. Conversely, if the customer perceives there ...
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