IFRIC 12 — Combined service concession and lease arrangements

Date recorded:

Accounting for combined service concession and lease arrangement

The Interpretations Committee received a request for clarification on the accounting treatment related to arrangements whereby public transport services were provided by an operating company for a public transport authority.  The submitter described different scenarios for effecting the arrangement that could include affiliated entities or a service concession arrangement in which the infrastructure that was used was leased, perhaps with the public transport authority guaranteeing the lease payments.   

The agenda paper described the particular fact-patterns submitted and identified three issues to be analysed: 

(i) whether the arrangement was in scope of IFRIC 12;

(ii) whether the operator was required to recognise lease assets and lease liabilities and

(iii) whether the recognised assets or liabilities should be presented on a gross or net basis and how they should be measured.

Staff recommendation 

The agenda paper discussed in detail the potential views of the staff for each question, before concluding that the Interpretations Committee should not take the issue into its agenda because there was sufficient guidance on the matters submitted.   

The proposed agenda decision was extensive and proposed the following conclusions (which we summarised):

(i) Scope: the assessment requires judgement and entities should consider all facts and circumstances to determine the scope of the transaction.

(ii) Recognition: the accounting for payments made by the operator to the grantor (including payments to a leasing company controlled by the same governmental body that controls the grantor) should be considered as part of the separate project being considered by the Interpretation Committee; and if the operator does not make payments, the operator first needs to assess whether any part of the arrangement is executory, if it is not the recognition of an asset and liability would be based on the nature of the consideration that the operator receives from the grantor.

(iii) Presentation and measurement:  the operator needs to assess whether it is operating as a principal or agent.  If the operator has an obligation to make payments to the leasing company and a right to receive payments from the grantor, the operator would account the asset and liability separately. 

Interpretations Committee discussion

There was general agreement with the staff recommendation for not taking the issue into the agenda. However, there were several concerns expressed by the majority of the Interpretation Committee members regarding the rationale for the recognition analysis (see below). The staff will revise the analysis and bring back a revised agenda decision at a future meeting.


There was general support for the staff analysis. Particularly, several Interpretation Committee members pointed out that the agenda decision would be an appropriate method to clarify that construction or upgrade services of the infrastructure were not necessary for the arrangement to fall in the scope of IFIC 12 as long as the scope requirements were met. It was also suggested to make the fact patter more generic (for example not focusing on transportation services) and focus on the general principles of IFRIC 12.


There were common concerns expressed by the Interpretation Committee members. The concerns were focus on:

(i) the analysis was difficult to follow and it was not clear when the analysis was following case 1 or case 2, it was also not clear whether the analysis was made on the perspective of the grantor or the operator;

(ii) the analysis should focus on the right of use of the assets instead of focusing on whether the arrangement contains executory or non-executory clauses; it was pointed  out that once the arrangement is in scope of IFRIC 12, the grantor controls the asset and accordingly, the grantor has a lease;

(iii) it is necessary to expand the analysis on the situation in which the operator guarantees the payment and requirements for the operator to recognise asset and liabilities in those cases;

(iv) the agenda decision should focus on key principles and help follow the thought process of the staff to reach the conclusion.

Presentation and measurement

The topic was not discussed given the concerns mentioned above.


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