Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p84
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 258272–261256

be consistent with the objective of the Board to develop a principle-based accounting standard; or

(b)                   not provide additional guidance in the final Standard on the basis there is sufficient guidance in the Standard. Paragraph B71 requires revenue to be recognised and the liability reduced based on the economic substance of the arrangement, usually as access to the service concession asset is provided to the operator over the term of the service concession arrangement.

     BC84            The Board decided not to add additional guidance. Revenue recognition should be based on the economic substance of the specific arrangement as assessed by the grantor and should not be prescribed by the Board.

Other liability recognition and measurement models
     BC85           The Board considered the following alternative recognition and measurement models to the GORTO model:

(a)                    applying the financial liability model to all service concession arrangements;
(b)                   accounting for the assets of the arrangement and not the right to charge users for the use of the service concession asset that has been granted by the grantor to the operator; and
(c)                   application of AASB 140 Investment Property by analogy.
     BC86            In analysing whether the financial liability model could be applied to all service concession arrangements, the Board considered:

(a)                    whether the nature of the party (the grantor or the users of the service concession asset) that makes the payment to the operator determines the accounting model for the grantor to recognise a service concession liability. Consistent with AASB Interpretation 12, the Board concluded the party that has the responsibility to make payments to the operator is important in determining the accounting model for the grantor's recognition of the liability. This view takes into account who bears the demand risk (ie the ability and willingness of the users to use and pay for the services). This view is consistent with the models in this Standard and mirrors the requirements of AASB Interpretation 12. That is, under the financial liability model, the grantor is the party with the primary responsibility to make payments to the operator for the services. This contrasts with the GORTO model, where the operator is the party that bears the demand risks. Accordingly, the use of different models (ie the financial liability model and the GORTO model) to account for the liability is more appropriate; and
(b)                   whether the grantor has a financial liability when the operator has been granted the right to charge third-party users for the use of the asset. The Board concluded that the grantor does not have a financial liability under GORTO arrangements. That is, the grantor does not have a contractual obligation to deliver cash or another financial asset to the operator nor exchange financial assets or financial