Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p59
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 189869–193177

BC3               Prior to the issue of this Standard, there was no specific Australian Accounting Standard that prescribed the accounting for service concession arrangements from the grantor's perspective.

     BC4               In determining an accounting policy for service concession arrangements in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, in the absence of AASB 1059, an Australian public sector entity might consider existing accounting requirements for service concession arrangements, including:

          (a)                    AASB Interpretation 12 Service Concession Arrangements – AASB Interpretation 12 (which incorporates IFRIC 12 Service Concession Arrangements) provides the accounting requirements for service concession arrangements by the operator of a service concession arrangement. AASB Interpretation 12 does not apply to a grantor;

          (b)                   AASB 16 Leases – AASB 16 provides guidance where the grantor makes payments to the operator, but does not provide guidance where the grantor grants the operator a right to charge users of the service concession asset;

          (c)                    AASB Interpretation 4 Determining whether an Arrangement contains a Lease – AASB Interpretation 4 provides guidance for the application of AASB 16; and

          (d)                   IPSAS 32 Service Concession Arrangements: Grantor – the International Public Sector Accounting Standards Board (IPSASB) published IPSAS 32 in October 2011. IPSAS 32 prescribes the accounting for service concession assets, liabilities, revenues and expenses by grantors. IPSAS 32 mirrors IFRIC 12 in most aspects.

     Australian public sector entities had also considered previous requirements in the United Kingdom set out in Financial Reporting Standard FRS 5 Reporting the Substance of Transactions, issued by the UK Accounting Standard Board. FRS 5 required an entity to recognise an asset and a liability where the entity had substantially all or the majority of risks and rewards incident to the ownership of a service concession asset.

     BC5               The lack of a specific Australian Accounting Standard that prescribed the accounting for a service concession arrangement from the grantor's perspective resulted in divergence in the accounting for such arrangements. For example, some grantors recognised service concession assets and liabilities in their statement of financial position while others did not. Given the significance of service concession arrangements to the Australian economy, it is important that the AASB issue an Accounting Standard to address the lack of explicit requirements for accounting for such arrangements. Recognition of service concession assets and related liabilities is important in assisting users of financial statements to understand the resources and obligations of a grantor involved in the provision of public services.

     BC6               The Board considered a range of alternatives for the accounting for service concession arrangements by a grantor. This included consideration of:

          (a)                    whether under the hierarchy for selecting accounting policies set out in AASB 108, the grantor could apply AASB Interpretation 12 by analogy. The