Project Summary – November 2005
30 Cannon Street, London EC4M 6XH, England
Phone: +44 (20) 7246 6410, Fax: +44 (20) 7246 6411
Email: iasb@iasb.org.uk Website: http://www.iasb.org.uk
International
Accounting Standards
Board
Service Concession Arrangements
IFRIC Project Updates are provided for the information and convenience of constituents who wish
to follow the IFRIC’s deliberations. All conclusions reported are tentative and may be changed at
future IFRIC or IASB meetings. Decisions become final only after formal approval by the IASB
to issue an International Financial Reporting Interpretation.
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Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Broadening D12-14
D12-14 concentrate on situations where existing IFRSs are
unclear.
Many respondents believed that the draft Interpretations
were complex or that they failed to deal with significant areas
of the topic.
 The following pages provide an outline of an approach to
broaden D12-14
-Amendments may be required as the IFRIC’s discussions
progress.
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Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Concessions
Many different types of arrangements exist:
– Service Contracts (specific tasks eg debt collection or
routine repair and maintenance)
– Leases (eg operator leases asset from public sector and has
responsibility for operating and maintaining asset)
– Concessions (maintenance and operation, build-operatetransfer and build-operate own)
– Divestitures/privatisations/regulated industries under
licence
– Technical provisions of contracts vary by sector and legal
framework varies by country
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Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Allocation of Key Responsibilities Under Main Options for Private Sector
Participation in Public Services
Commercial
risk
Typical
Duration
Residual
Interest
Examples
of
Applicable
IFRSs
Arrangement
Type
Service
Contract (eg
specific tasks
debt collection)
Public
Private and or
Public
Public
Public
1-5 years
Public
Lease
(eg. lease of an
asset)
Public
Private
Public
Shared
8-20
years
Public
Concession (eg
build-operatetransfer)
Public
Private
Private
Private and
Public
25-30
years
Public
D12-14
Concession
(eg build-ownoperate)
Private
Private
Private
Private
25-30
years
Private
IAS 16, 23
(PPE)
100%
Divestiture/
Regulated
4 industries under
licence
Private
Private
Private
Private
Indefinite
or (may
be limited
by licence
Private
IAS 18
(rendering
of services)
Clear
Capital
investment
IAS 17
IAS 16, 23
(PPE)
Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
IFRIC Focus
Operations
and
maintenance
Asset
ownership
Clear
Generally lines between the options are blurred
IFRSs
Project Summary – November 2005
Draft Flowcharts
•There are various ways to flowchart these complex arrangements. The following
pages provide one example. Amendments may be required as IFRIC’s
discussions progress.
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Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Flowchart A
Treatment of Infrastructure – Books of Operator
Determine whether Operator should recognise PPE
Grantor has right of use
Recognition /DeRecognition
Infrastructure comprises/includes pre-existing assets of Grantor
Apply
IAS 16
Yes
Is there a Sale Of
Infrastructure to
Operator?
IAS 18.14 Test
Explanation:
-conveys right of use;
-transfers risks and
rewards to operator; and
-grantor has no
managerial involvement
No
Is there a lease of the
Infrastructure to the Op?
No
Apply D12 – Operator has right to
Access/Operate only – (Asset
remains PPE Of Grantor)
Does Grantor have
primary responsibility to
pay
Yes
6
Yes
D13 – Financial Asset Model
Apply IAS 17
Substantially all
R&R Op. = Fin Lse
R&R Gr. = Op Lse
Explanation:
-grantor not the operator
has ‘right of use’ because the grantor :
(a): controls or regulates
services provided by the
operator and (b)
controls the significant
residual interest in the
infrastructure at the end
of the concession
No
D14 – Intangible Asset Model
Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Flowchart B
Treatment of Infrastructure – Books of Operator
Determine whether Operator should recognise PPE
Derecognition IAS 16
Pre-existing Infrastructure of Operator (used exclusively for purposes concession)
Is there a Sale of
Infrastructure to
Grantor?
Is there a lease of the
infrastructure to Grantor?
No
Yes
Apply IAS 17
R&R Gr. = Fin Lse
R&R Op. = Op Lse
Yes
Apply IAS 18
7
Explanation:
-conveys right of use
and transfers risks
and rewards to
grantor; and
-operator has no
managerial
involvement
No
Apply IAS 16
(Asset remains PPE Of
Operator)
Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution
Project Summary – November 2005
Flowchart C
Treatment of Infrastructure – Books of Operator
Determine whether Operator should recognise PPE`
Infrastructure is constructed or acquired* by the Operator
Grantor
Operator supplied
construction
services/acquires on
grantors behalf
Explanation:
Whose asset?
-Definition of an
asset from
Framework;
-Definition of
PPE from IAS
16
See flowchart A
8
Operator
Operator
constructed/acquired own
asset
See flowchart B
* From 3rd Party
Copyright © 2005 International Accounting Standards Committee Foundation. All rights reserved. May be distributed freely with appropriate attribution