Three 'service concessions' proposals from IFRIC

  • IFRIC (International Financial Reporting Interpretations Committee) (blue) Image

04 Mar 2005

The International Financial Reporting Interpretations Committee (IFRIC) has released for public comment three related Draft Interpretations on service concession arrangements.

The Draft Interpretations are:

  • D12 Service Concession Arrangements - Determining the Accounting Model
  • D13 Service Concession Arrangements - the Financial Asset Model
  • D14 Service Concession Arrangements - the Intangible Asset Model

Service concession arrangements are arrangements whereby a government or other body grants contracts for the supply of public services, such as roads, energy distribution, prisons, or hospitals, to private operators.

D12 proposes that if, as often happens, the grantor continues to control how the infrastructure is used both during and after the concession, the operator should not recognise that infrastructure as its own property, plant, and equipment. The operator may construct or acquire such infrastructure for the purpose of the concession. If it does so, it should account for having provided construction services to the grantor under a construction contract, and recognise as an asset the rights it receives in exchange from the grantor.

D13 and D14 provide guidance on how the operator should apply relevant IFRSs when it recognises a financial or intangible asset respectively. Both address the recognition and measurement of contract revenue and costs, and service concession assets and obligations (such as obligations to repair and maintain infrastructure).

The three Interpretations are proposed to be effective for annual periods beginning on or after 1 January 2006. Early adoption would be permitted.

Comments are requested by 3 May 2005. Click for IASB Press Release (PDF 61k). Download the draft Interpretations from IASB's Website.


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