Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p64
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 204363–207464

proposed guidance for assessing whether a grantor controls the service concession asset, including:

(a)                    the risks and rewards approach;

(b)                   the rights and obligations approach;

(c)                    the control or regulation approach (the IPSAS 32 concept of control); and

(d)                   an approach analogous to the principles of control specified in AASB 10 Consolidated Financial Statements.

     BC21            The Board decided to adopt the IPSAS 32 concept of control (the control or regulation approach) for the following reasons.

     BC22            In considering the merits of the risks and rewards and the control-based approach to assess whether the grantor should recognise the asset, the Board noted that the risks and rewards approach focuses on the economic aspects of the terms and conditions in the arrangement. The Board did not consider this focus to be appropriate for service concession arrangements in the Australian public sector. This is because the primary purpose of a service concession asset, from the grantor's point of view, is to provide specified public services on behalf of the grantor and not to provide economic benefits such as revenue generated by such assets (eg from user fees). A control-based approach focuses on control over the service potential of the service concession asset.

     BC23            Service concession arrangements are often entered into to share the risks between the grantor and the operator. The Board questioned whether objective criteria could be established as the basis for consistent assessments of the risks and rewards. In addition, the weighting of various risks and rewards was seen to be problematic. The Board also noted the IASB has progressively been moving away from the risks and rewards approach to focus on the concept of control when determining what assets should be recognised (eg AASB 10 and AASB 16 have a primary focus on control, with risks and rewards a secondary consideration). The Board also considered its transaction neutrality approach and noted the risks and rewards approach would be inconsistent with the principles in AASB Interpretation 12. The Board concluded that the risks and rewards approach was not appropriate for an Australian Accounting Standard addressing grantor accounting for service concession arrangements.

     BC24            In considering the rights and obligations approach, the Board noted that although this could have conceptual merit, it would represent a significant change in the accounting for and financial reporting of assets and liabilities for public sector entities that could have implications beyond service concession arrangements. The Board concluded that the rights and obligations approach was not appropriate at this time for an Australian Accounting Standard addressing grantor accounting for service concession arrangements.

     BC25            The Board discussed application of the concept of control in AASB 10 by analogous interpretation, and decided that the principles for assessing control of an