Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p103
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 310662–313780

the Standard specifically addressed only financial consideration paid by the grantor to the operator prior to the date of initial application of the Standard. The stakeholder commented that the GORTO liability and subsequent revenue would also be likely to be overstated if the grantor had provided non-financial consideration prior to the date of initial application that was not adjusted in determining the grantor's GORTO liability.

     BC5               The Board considered the feedback received and decided to amend AASB 1059 to address the issues. The Board decided that expanding the scope of the amendments to include non-financial consideration was appropriate, based on the principles and approach proposed in the Fatal-Flaw Review version.

Consideration transferred to the operator prior to the date of initial application

     BC6               The Treasury office commented in raising the issue for the AASB's consideration that AASB 1059 did not specify how consideration paid by the grantor to the operator prior to the date of initial application (i.e. that was not a financial liability at the date of initial application) should be treated under the modified retrospective transition approach. The stakeholder noted that if such consideration is not adjusted in the grantor's GORTO liability calculation, the GORTO liability at the date of initial application would be likely to be overstated, which in turn would lead to the overstatement of revenue in subsequent periods as the GORTO liability is unwound over the period of the service concession arrangement. The Board concluded that the GORTO liability and subsequent revenue would be overstated whether the grantor had provided financial or non-financial consideration prior to the date of initial application that was not adjusted in determining the grantor's GORTO liability.

     BC7               The Board noted that consideration transferred by the grantor to the operator in respect of a service concession asset does not represent a liability or revenue for the grantor and therefore would not be recognised appropriately as part of the GORTO liability on transition. Under paragraph 12 of AASB 1059, such consideration is required to be adjusted when measuring the grantor's liability at initial recognition based on the current replacement cost of the service concession asset. This requirement is also applicable for entities applying the full retrospective transition approach to the implementation of AASB 1059.

     BC8               The Board considered amending the GORTO liability calculation under the modified retrospective transition approach has merit. The current drafting of the modified retrospective transition approach could result in overstatement of the GORTO liability for affected grantors at the initial application date and of the subsequent revenue recognition, which would continue throughout the remaining period of the affected service concession arrangements. Considering the potential public interest in and user information needs regarding service concession arrangements, these overstatements could