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The Interpretations Committee tentatively decided not to address the issue

 12 January 2016


The Interpretations Committee received a request to clarify the accounting for contractual payments that are to be made by an operator to a grantor under a service concession arrangement within the scope of IFRIC 12 Service Concession Arrangements.

The Interpretations Committee discussed this issue at several meetings. The Interpretations Committee observed that in some cases, the operator may be acting as an agent with respect to the contractual payments. For example, the operator may collect payments on behalf of, and remit them to, the grantor. The Interpretations Committee observed that in cases in which the operator is acting as a principal with respect to the contractual payments:

  1. If the contractual payments give the operator a right to a good or service that is separate from the service concession arrangement, the operator would account for that separate good or service in accordance with the applicable Standard.
  2. If the contractual payments are linked to the right to use a tangible asset that is separate from the infrastructure, the operator would assess whether the arrangement contains a lease. If the arrangement contains a lease, that portion of the arrangement would be considered to be within the scope of the applicable Standard on leases.
  3. If the contractual payments do not give the operator a right to a separate good or service or a separate right of use that meets the definition of a lease, the contractual terms of the service concession arrangement would determine the accounting for the contractual payments to be made by the operator to the grantor:
    1. if the service concession arrangement results in the operator having only a contractual right to receive cash from the grantor (ie the financial asset model in IFRIC 12 applies), the Interpretations Committee observed that the grantor is no different from a customer in a revenue arrangement. Consequently, the contractual payments would be accounted for in accordance with the guidance on consideration payable to a customer in paragraphs 70-72 of IFRS 15 Revenue from Contracts with Customers;
    2. if the service concession arrangement results in the operator having only a right to charge users of the public service (ie the intangible asset model in IFRIC 12 applies), the Interpretations Committee observed that the operator has received an intangible asset (ie the right to charge the users of the public service) in exchange for construction/upgrade services and the contractual payments to the grantor. Consequently, the Interpretations Committee noted that the contractual payments represent additional consideration for the intangible asset (ie part of the cost of the intangible asset recognised in accordance with IAS 38); and
    3. if the operator has both a right to charge users of the public service and a contractual right to receive cash from the grantor, the entity should consider the substance of the contractual payments to determine whether it represents consideration for the concession right intangible asset or if it should be accounted for as consideration payable to the customer.

The Interpretations Committee noted that the payments to be made by an operator may be variable payments, and that the events that trigger those variable payments may in some cases be within the control of the operator and in other cases may be outside the control of the operator. The Interpretations Committee noted that accounting for variable payments to be made by the operator in a service concession arrangement, when the intangible asset model in IFRIC 12 applies, is linked to the broader issue of accounting for variable payments for asset purchases. In its discussions on that broader issue, the Interpretations Committee could not reach a consensus on whether the variable payments that depend on the purchaser’s future activity should be recognised as a liability before that activity is performed or on what the initial measurement of this liability should be. In the case of the broader issuer on variable payments for asset purchases, the Interpretations Committee concluded that the issue was too broad for it to address.

Some members of the Interpretations Committee were of the view that service concession arrangements represent a unique type of arrangement, because the operator typically has an ongoing contractual obligation to provide the service. These members thought that a solution could be developed to address the accounting for payments to be made by an operator to a grantor without the need to address the broader issue of variable payments for asset purchases.

However, on balance, the Interpretations Committee concluded that addressing service concession arrangements that included such variable payments would also be too broad for it to address. The Interpretations Committee tentatively decided not to take the issue of accounting for payments by an operator to a grantor in a service concession arrangement onto its agenda.


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