Identification Of Separate Components Of Secured Transactions

Identification of the separate components of secured transactions under IAS 18.

Paragraph 13 of IAS 18 relates to the identification of the separate components of secured transactions while paragraph 19 relates to the matching of revenues and expenses for the purposes of simultaneous recognition. Paragraph 13 requires the entity to identify the components of transactions separately. Thus if two or more goods are to be delivered at different times, paragraph 13 requires revenue to be allocated to each delivered and undelivered element of the transaction.

This is in contrast to matching the expected costs of goods that have already been delivered as required under paragraph 19. In other words, paragraph 19 does not deal with revenue recognition; it deals with expected costs to be incurred once revenue has already been recognized.

A multiple-element transaction is one in which there are separately identifiable components to each of which the recognition criteria must be applied in order to reflect the substance of the transaction. The total consideration for the transaction is allocated between the elements. Examples include: the selling price of a product that includes an amount for subsequent servicing; and a telephone service provider who provides a free handset to a customer who subscribes for a service contract.

Identification of the separate components of secured transactions covered under IAS 18.

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