IAS 18 says that you should apply the
‘recognition criteria to the separately identifiable components of a single
transaction’ (M.,2017), however it does not give any guidance on how to
identify these components and how to allocate the selling price. When
identifying individual obligations in the contract IAS 18 only specifies the
criteria for sale of goods, rendering of services and interest, royalties and
dividends, which are usually applied separately for each transaction. However,
there is no clear criteria as to which components are separate and should be
reported as such. This then meant it was down to individuals or companies own
interpretation to best show how much revenue is to be recognised. For example,
because of this some products that come free when you sign up to services are
not apportioned to be included in the revenue, instead they are treated as cost
of acquiring the customer. The criteria for the following are: