IFRIC 12 on service concession arrangements

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

01 Dec 2006

The International Financial Reporting Interpretations Committee (IFRIC) has issued Interpretation IFRIC 12 'Service Concession Arrangements'.

Service concessions are arrangements whereby a government or other public sector entity grants contracts for the supply of public services – such as roads, airports, prisons and energy and water supply and distribution facilities – to private sector operators. Control of the assets remains in public hands, but the private sector operator is responsible for construction activities, as well as for operating and maintaining the public sector infrastructure.

IFRIC 12 addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements.

Click for Press Release (PDF 52k). IFRIC 12 is effective for annual periods beginning on or after 1 January 2008.


A brief summary of IFRIC 12

IFRIC 12 draws a distinction between two types of service concession arrangement:

  • In one, the operator receives a financial asset, specifically an unconditional contractual right to receive cash or another financial asset from the government in return for constructing or upgrading the public sector asset.
    • The operator recognises the financial asset to the extent that it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction services
    • The operator measures the financial asset at fair value
  • In the other, the operator receives an intangible asset – a right to charge for use of the public sector asset that it constructs or upgrades. A right to charge users is not an unconditional right to receive cash because the amounts are contingent on the extent to which the public uses the service.
    • The operator recognises the intangible asset to the extent that it receives a right (a licence) to charge users of the public service
    • The operator measures the intangible asset at fair value.


Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.