IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley IFRS: Practical Implementation Guide and Workbook

10. IFRIC 12

10.1 In certain countries construct ion or maintenance of infra structure for publi c services (roads,

bridges, water distributi on faciliti es) is contracted out to private-sector operators. The private–

sector operators are usually paid for their services over the term of the arrangements. Such

arrangements are often described as "build-operate-transfer" ("BOT" ) or "re habilitate-operate–

transfer" or a "public-to-private service concession arrangement."

10.2 During Novembe r 2006, the IASB issued IFRIC 12,

Service Concession Arrangements,

which is effec tive for annual periods beginning on or after January I, 2008 . This IFRIC provides

guidance on the accounting by private-sector operators for "public-to-private" service conce ssion

arrangements. It should be noted that this Interpretat ion does not specify the acco unting by gran–

tors of the concess ions.

10.3 This Interpretation sets out genera l princ iples for recognizing and measuring the obligations

and related rights in service concessio n arrangements (disclos ure requirements about service

concessio n arrangements are detailed in SIC-29).

Thi s IFRIC addres ses the follow ing issues, and the consensus views on these issues are:

(a) Treatment of the operator's rights over the infrastructure-IFRIC 12 categorically states

that the operator's right over the infrastructure shall not be recogni zed as property, plant ,

and equipment of the operator since the service arrangement does not conve y the right to

control the use of the publi c service infrastructure to the operator.

(b) Recognition and measurement of arrangement con siderati on-if the operator constructs or

upgrades infrastructure (i.e., provides construction or upgrade serv ices) used in providing a

public service or operates and maint ains it for a specifi ed period of time, then the operator

shall recognize and measure revenue in accordance with lASs

and 18 for the services it

performs.

to construction or upgrade services in accordance with lAS

I I .

(d) Consideration given by the grantor to the operator-if the opera tor renders construction or

upgrade services, the consideration received or rece ivable by the operator shall be

recognized at its fair value. The consideration may be rights to a financial asset or an

intangible asset.

(e) Recogni zing a "financia l asset"-the operator shall recognize a financial asset to the extent

that it has an unconditi onal contractual right to receive cash or any other financial asset

from or at the direction of the grantor for the construction services. Usually, the grantor

has little, if any, discretion to avoid payment, because the agreement is enforceable by law

(please refer to chapters on financial instruments for detailed discussion on financial

assets).

(I)

Recognizin g an "intangible asse t"- the operator shall recog nize an intangible asset to the

extent that it receives a right or a licence to charge users of the public service (for a

detailed discussion on intangibl e asse ts please refer to the chapter on "intangible assets").

A right to charge users of the public service is not an unconditi onal right to receive cash

because the amounts are contingent and depend on the exte nt that the public uses the

service. The operator shall account separately for the con struction serv ices paid partly by a

financial asset and partly by an intangible asset. The consideration received or receivable

for both components shall be recogni zed initially at the fair value of the conside ration

received or receivable.

(4)

An entity shall disclose

The amount of contract revenue recogni zed as revenue in the period

The method s used to determ ine the contract revenue recog nized in the period

The methods used to determine the stage of completion of contracts in progress at the bal–

ance sheet date

For contracts in progress at the balance sheet date

11. DISCLOSURES

11.1

( I)

(2)

(3)