Sunshine Joy R. Gino
BSMA 3102
Module 10 Accounting for Build-Operate-Transfer
MULTIPLE CHOICE: THEORY/PROBLEMS
(#’s 1 to 9 - TRUE OR FALSE)
1. “Build-operate-transfer” is not common in the Philippines.
2. Another term for “Build-operate-transfer” is Service concession arrangement.
3. Under a BOT contract that is within the scope of IFRIC 12, the grantor is the
government.
4. According to IFRIC 12, the property subject to a BOT contract shall be recognized
as property, plant and equipment by the grantee before it is relinquished to the
grantor.
5. The grantor under a BOT contract that is within the scope of IFRIC 12 acts as a
service provider rather than a manufacturer.
6. IFRIC 12 applies only to construction or upgrade services but not to operation
services.
7. The consideration given by the grantor to the operator under a BOT contract may be
a financial asset, an intangible asset, or partly a financial asset and partly an
intangible asset. The consideration is in the form of an intangible asset if the
operator is granted an unconditional contractual right to receive cash from the
grantor.
8. If the consideration in a BOT contract is partly a financial asset and partly an
intangible asset, the operator shall account for these two components separately.
9. The operator under a BOT contract receives a backhoe from the grantor. Control
over the backhoe is transferred to the operator. The operator shall treat the backhoe
as part of the transaction price that will be recognized as revenue.
(#’s 10 to 15 - MULTIPLE CHOICE)
Fact pattern
A BOT contract has the following terms:
● Construction of an underground railway (expected completion time is 5 years).
● Maintenance and operation of the underground railway for 5 years after its
completion.
● The grantor shall pay the operator ₱100M from Years 4 to 10. Payments are due at
the beginning of each year.
10. The nature of the consideration in the contract is in the form of
a. a financial asset.
b. an intangible asset
11. If the operator identifies two
these two obligations?
Performance obligation 1
a. Maintenance
b. Construction
c. Construction
d. Operation
c. partly (a) and partly (b)
d. neither (a) nor (b)
performance obligations in the contract, what would be
Performance obligation 2
Operation
Maintenance
Maintenance and operation
Resurfacing
12. According to IFRIC 12, the nature of the operator’s obligation in the BOT
contract is
a. constructor
c. service provider
b. manufacturer
d. operator
13. If the operator identifies two performance obligations in the contract, which of the
following statements is true?
a. The operator allocates the cash collections to the two performance obligations,
based on their relative stand-alone selling prices.
b. The operator allocates the present value of the cash collections to the two
performance obligations, based on their relative stand-alone selling prices.
c. The operator allocates the present value of the cash collections to a single
performance obligation.
d. None of these
14. How should the operator recognize revenue from the BOT contract?
Performance obligation 1
Performance obligation 2
th​
a. upon completion in the 5​ year as services are provided
b. as collections are received
as collections are received
c. based on progress billings
based on measure of progress
d. based on measure of progress as services are provided
15. By the end of the 10​th year of the contract, the operator would have recognized
total revenue equal to (assume a discount rate of 10%)
a. 100M x 10 years
b. 100M x PV ordinary annuity @ 10%, n=7
c. 100M x PV of 1 @ 10%, (n=3, n=4, n=5, n=6, n=7, n=8, n=9)
d. 100M x PV of 1 @ 10%, (n=4, n=5, n=6, n=7, n=8, n=9, n=10)
Answers:
1. FALSE
2. TRUE
3. TRUE
4. FALSE
5. TRUE
6. TRUE
7. FALSE
8. TRUE
9. TRUE
10. C
11. B
12. C
13. A
14. A
15. D