Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p105
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 316327–319288

the service concession arrangement relative to the total period of the arrangement; and finally deducting the fair value of any related financial liability as at the date of initial application; and

         * Option 4 – measure the GORTO liability by applying the proportion of the GORTO liability relative to the total liability calculated at the inception of the service concession arrangement to the current replacement cost of the service concession asset as at the initial application date; and then adjusting this amount to reflect the remaining period of the service concession arrangement relative to the total period of the arrangement.

     BC12            The Board was concerned that if a contribution was made close to the inception of the arrangement and the capitalised grantor contribution has a low carrying amount on the initial application date because it has been amortised over a number of periods, Option 1 could result in a similar outcome to the current modified retrospective transition approach. However, this effect would be moderated since the higher the number of years of amortisation to the date of initial application, the smaller the remaining period of the arrangement, which would reduce the calculated GORTO liability.

     BC13            The Board rejected Option 2. This is because the modified retrospective transition approach requires the service concession asset and any outstanding financial liability to be measured at fair value as at the initial application date. Deducting the sum of historical amounts – ignoring the time value of money for the consideration paid prior to the initial application date – from the fair value of the asset might not result in an appropriate GORTO liability amount. The time value of money would be particularly relevant for consideration paid by instalments under the arrangement.

     BC14            The Board decided against Option 3 because estimation of the fair value of historical consideration transferred might not be a straightforward exercise and further guidance might be required to assist grantors in identifying the factors a market participant would consider when pricing such historical consideration, such as the appropriate interest rate. Such guidance would be unlikely to be finalised in time for entities applying AASB 1059 to the annual reporting period ending 30 June 2021, which is the initial mandatory application of the Standard for most (if not all) Australian public sector grantors.

     BC15            Under Option 4, applying the proportion of the GORTO liability relative to the total liability calculated at the inception of the service concession arrangement would limit the basic GORTO liability amount at the date of initial application, which is then apportioned again to reflect the remaining period of the arrangement. However, in order to calculate the proportion of the GORTO liability relative to the total liability at inception,