Recognition and measurement of service concession assets (paragraphs B14-B59) (AASB1059_07-17_COMPdec21_01-22)

The grantor shall recognise an asset provided by the operator and an upgrade to or a major component replacement for an existing asset of the grantor as a service concession asset if the grantor controls the asset. The grantor controls the asset if, and only if:

(a) the grantor controls or regulates what services the operator must provide with the asset, to whom it must provide them, and at what price; and

(b) the grantor controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the asset at the end of the term of the arrangement.

The grantor shall recognise an asset that will be used in a service concession arrangement for its entire economic life (a ‘whole-of-life’ asset) if the conditions in paragraph 5(a) are met. In this case, the condition in paragraph 5(b) is not relevant and therefore the grantor controls the whole-of-life asset if the conditions in paragraph 5(a) are met.

The grantor shall initially measure the service concession asset recognised in accordance with paragraph 5 (or paragraph 6 for a whole-of-life asset) at current replacement cost in accordance with the cost approach to fair value in AASB 13 Fair Value Measurement.

Where an existing asset of the grantor meets the conditions specified in paragraph 5 (or paragraph 6 for a whole-of-life asset), the grantor shall reclassify the existing asset as a service concession asset and shall measure the asset at current replacement cost in accordance with the cost approach to fair value in AASB 13 as at the date of reclassification. The grantor shall recognise any difference at that date between the carrying amount of the asset and its fair value (current replacement cost) as if it is a revaluation of the asset. This approach does not mean that the grantor has adopted the revaluation model.

After initial recognition or reclassification, the grantor shall account for a service concession asset during the term of the service concession arrangement as follows:

(a) depreciate or amortise the depreciable amount of the asset over the useful life in accordance with AASB 116 Property, Plant and Equipment or AASB 138 Intangible Assets, as appropriate, with any impairment recognised in accordance with AASB 136 Impairment of Assets; and

(b) references to fair value in other Standards shall be read as references to current replacement cost for service concession assets. For example, this means that current replacement cost is the basis for fair value measurement of service concession assets under a revaluation model. Furthermore, the active market requirements in AASB 138 for the revaluation of an intangible asset shall not apply.

The grantor shall account for a service concession asset after the end of the term of the service concession arrangement in accordance with other Accounting Standards and as specified below. In particular:

(a) the grantor reclassifies the asset based on its nature or function;

(b) references to fair value in other Standards shall no longer be read as references to current replacement cost. For example, any of the approaches in AASB 13 to fair value measurement may be applied to the asset under a revaluation model, as appropriate. Furthermore, the active market requirements in AASB 138 for the revaluation of an intangible asset shall apply; and

(c) the grantor derecognises the asset in accordance with AASB 116 or AASB 138, as appropriate, only when the grantor loses control of the asset. For example, internally generated intangible assets that were recognised as service concession assets (including those that do not qualify for recognition under AASB 138) are not derecognised at the end of the term of the service concession arrangement, unless the grantor loses control of the asset at that time.