Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p97
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 294288–297374

1059 in relation to:

         * measurement of the financial liability set out in paragraph C4(b); and

         * measurement of the liability representing the unearned revenue arising from the receipt of additional consideration from the operator for access to an existing asset of the grantor that has been reclassified as a service concession asset.

     BC5               The Board considered stakeholders' feedback and decided to amend AASB 16 and AASB 1059 to address these issues.

Modified retrospective method to measure the financial liability

     BC6               The Board received comments from stakeholders that AASB 1059 was not clear whether the financial liability should be measured under the modified retrospective approach at the same amount as the fair value (current replacement cost) of the service concession asset received (similar to the initial recognition requirement); or in accordance with AASB 9 Financial Instruments (similar to the subsequent measurement requirement). The Board decided to amend paragraph C4(b) to clarify the measurement of the financial liability at fair value on the date of initial application.

     BC7               The Board noted that paragraphs 5.1.1A and B5.1.2A of AASB 9 require entities to recognise a financial liability at fair value at initial recognition and the difference between the fair value at initial recognition and the transaction price. The Board considered that, for the purpose of the modified retrospective method, the grantor of a service concession arrangement would not be required to identify the difference between the fair value of the financial liability on the date of initial recognition and the historical transaction price, and so referred directly to measurement at fair value rather than in accordance with AASB 9.

Modified retrospective method to measure the GORTO liability resulting from receipt of a service concession asset

     BC8               Under the modified retrospective method in AASB 1059 paragraph C4(c), a grantor measures a GORTO liability resulting from receipt of a service concession asset based on the "fair value (current replacement cost) of the related service concession asset received at the date of initial application, adjusted to reflect the remaining period of the service concession arrangement relative to the remaining economic life of the asset …" (emphasis added). Stakeholders indicated two issues in applying the calculation: (1) anomalous outcomes when a service concession asset has an indefinite economic life; and (2) a significantly lower GORTO liability compared to the asset if the remaining economic life of the service concession asset is significantly greater than the remaining concession period on transition to AASB 1059.

Extent of the issues and The AASB's Not-for-Profit Entity Standard-Setting Framework

     BC9               In discussions with the Treasury/Finance departments and/or Audit Offices in four jurisdictions, it was noted that some agencies in two States and some local councils in one State are experiencing the