Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p86
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 263642–266528

the combination of the service concession asset and the liability would give on a net basis the appropriate measure of the service concession asset, reflecting the cash flows expected to be generated for the grantor. This approach would avoid measuring the service concession asset at a net amount, such as the residual value of the asset.

     BC91            However, the Board decided that the investment property model should not be applied by analogy. The Board concluded (see paragraph BC66) that service concession assets should be measured at fair value (current replacement cost) in relation to the service potential of the asset, rather than reflecting only the expected future cash flows for the grantor.

Dividing an arrangement
     BC92            In response to constituents' comments, the Board decided to revise the approach to dividing a hybrid arrangement that had been proposed in ED 261. Instead of noting that each component of the service concession liability should be measured at fair value, the Standard requires that:

(a)                    the liability recognised under a hybrid arrangement is initially measured at the same amount as the fair value (current replacement cost) of the service concession asset; and
(b)                   the method for dividing the liability under a hybrid arrangement is to determine the financial liability part of the liability first, with the remainder of the fair value (current replacement cost) of the service concession asset allocated to the part related to the grant of the right to the operator.
     BC93            The Board, in making the decision in paragraph BC92(b), considered whether the amounts allocated to the  financial liability and the GORTO liability should depend on the entity's ability to determine the fair value of the service concession asset to be accounted for in relation to each liability model in the hybrid arrangement. For example, if the fair value of the service concession asset related to the grant of the right to the operator could be reliably determined, a method of dividing the hybrid arrangement might be to allocate this amount to the GORTO liability, with the remainder of the total liability to be allocated to the financial liability. However, the Board took the view that it would be difficult to determine fair values for the portions of a service concession asset related to each of the two liabilities, if it were possible. Similarly, it would be difficult to determine fair values for both liabilities directly, to allow the fair value (current replacement cost) of the service concession asset to be allocated to each liability based on their relative fair values, following the approach in AASB 15 to allocating the transaction price to performance obligations. Furthermore, since the liability is not measured directly at fair value under the financial liability