IFRIC 18 and revenue recognition
The facts are as in Situation 1 in above. By regulation, the network company has an obligation to provide ongoing access to the network to all users of the network at the same price, regardless of whether they transferred an asset. Therefore, users of the network that transfer an asset to the network company pay the same price for the use of the network as those that do not. Users of the network can choose to purchase their electricity from distributors other than the network company but must use the company’s network to access the supply of electricity.
The fact that users of the network that transfer an asset to the network company pay the same price for the use of the electricity network as those that do not indicates that the obligation to provide ongoing access to the network is not a separately identifiable service of the transaction. Rather, connecting the house to the network is the only service to be delivered in exchange for the substation. Therefore, the network company should recognise revenue from the exchange transaction at the fair value of the substation or at the amount of the cash received from the real estate company when the houses are connected to the network in accordance with IAS 18.