Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p46
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 140029–142895

the road base is constructed in year 1, and that the road only becomes ready to use at the end of year 2.

     IE7                 The replacement of a major component of the road as a separate component of the service concession asset occurs in year 8, and is recognised as a new service concession asset when the resurfacing work is performed. This also results in an increase in the liability recognised by the grantor, in accordance with paragraph B48. Where the liability relates to the grant of a right to the operator model, additional revenue in respect of this increase is recognised evenly over the remaining term of the arrangement. However, if the expenditure represented an improvement in service potential such as a new traffic lane rather than restoration to original service capability then it would be appropriate to instead recognise revenue relevant to that improvement only once it has occurred.

     IE8                 At the beginning of year 3, the total fair value (current replacement cost) of the road is CU1,082, comprised of CU972 related to the base layers (including implied funding costs due to the extended construction period) and CU110 related to the surface layers. The fair value of the surface layers is used to estimate the fair value of the resurfacing (which is treated as a replacement component in accordance with AASB 116). The estimated life of surface layers (ie six years) is also used to estimate the depreciation of the replacement component in years 9 and 10.

     IE9                 The road base has an economic life of 25 years. Annual depreciation is recognised by the grantor on a straight-line basis. It is therefore CU39 (CU972/25) for the base layers. The surface layers are depreciated over 6 years (years 3–8 for the original component, and starting in year 9 for the replacement component). Annual depreciation related to the original surface layers and the replacement surface layers is CU18 (CU110/6).

     IE10              The effective interest rate in the service concession arrangement is 6.18 per cent per year.

     IE11              It is assumed that all cash flows take place at the end of the year.

     IE12              It is assumed that the time value of money is not significant.

     IE13              At the end of year 10, the arrangement will end and the operator will transfer the operation of the road to the grantor.

     IE14              The total compensation to the operator under each of the two examples is inclusive of each of the components of the service concession arrangement and reflects the fair values (current replacement cost) for each of the assets and services, which are set out in Table 6.

     IE15              The grantor's accounting policies include:

          (a)                    service concession assets (property, plant, and equipment) –