IFRIC 12 – Payments made by an operator to a grantor in a service concession arrangement – Agenda paper 5

Background

A request was received relating to the accounting for variable contractual payments made by an operator under a service concession agreement within the scope of IFRIC 12.

The issue has been discussed in numerous Committee meetings, with the committee noting that this is part of the broader issue of accounting for variable payments for asset purchases. In their November 2015 meeting, the Committee decided that developing accounting for variable payments for asset purchases was too broad an issue for it to address and issued a tentative agenda decision.

The Committee then considered whether a solution could be reached relating to the accounting for payments made by an operator to a grantor without addressing the variable payments for asset purchases issue. They decided that this issue, too, was too broad and requested the staff to prepare a tentative agenda decision. The Interpretations Committee issued a tentative agenda decision in January 2016. The purpose of this session is to consider the comments letters received and the staff recommendation.

Analysis of comment letters

The staff indicates that the comment letters supported the tentative agenda decision. The staff recommendation is that the Interpretations Committee finalise the agenda decision, but with some amendments to:

• (i) Clarify how the term agent is used; and
• (ii) Make this decision consistent with the published agenda decision on the broader issue of variable payments — the tentative agenda decision refers to an obligation being outside the control of the purchaser whereas broader decision considered variable payments that are dependent on the purchaser future activity.

The staff recommendation is not to amend the agenda decision for the following matters raised by respondents:

• (i) Assessing what is a separate good, service or right-of-use. The staff believes that this analysis relates to whether particular assets or infrastructure are in scope of IFRIC 12, and is not within the scope of the agenda decision.
• (ii) Variable payments not being addressed when the intangible asset model in IFRIC 12 applies. The staff believes that the issue cannot be addressed without addressing the broader issue of variable payments more comprehensibly.
• (iii) The interaction of IFRIC 12 and the principal agent requirements in IFRS 15.

Staff recommendation

The staff recommends confirming the agenda decision with the changes in the wording as outlined in appendix A of the agenda paper.