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FASB issues guidance on service concession arrangements

  • FASB (US Financial Accounting Standards Board) Image

Jan 24, 2014

The FASB has issued Accounting Standards Update (ASU) No. 2014-05, “Service Concession Arrangements,” which prohibits an operating entity from accounting for a service concession arrangement as a lease. In addition, the ASU states that “infrastructure used in a service concession arrangement should not be recognized as property, plant, and equipment of the operating entity.”

This ASU affects operating entities that enter into service concession contracts with a public-sector entity grantor to operate the grantor’s infrastructure to provide a public service. It is effective for public business entities with fiscal years beginning after December 15, 2014, and interim periods therein. For entities that are not public business entities, the guidance becomes effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. Early adoption is permitted.

For more information, see Deloitte's Accounting Journal Entry and ASU 2014-05 on the FASB’s Web site.


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