Document ID: chunk:federal_register_of_legislation:F2023C00402:reg:97:p45
Version: federal_register_of_legislation:F2023C00402
Segment Type: reg
Provision Reference: reg 97 (pt 45/56)
Character Range: 383701–386550

AASB 15.

     BC94            The Board noted that in AASB 1059, under the 'grant of a right to the operator' (GORTO) model, the licensor is effectively licencing the operator to use the service concession asset. The Board noted its consideration of applying the IP licensing guidance in AASB 15 to account for these arrangements in the scope of AASB 1059, but instead decided to require revenue to be recognised over time under the GORTO method. The Board also observed that a licensor is required to perform certain monitoring activities in a service concession arrangement, such as identifying non-paying vehicles and in the collections of non-payment toll fares.

     BC95            The Board considered whether this set a precedent to provide a rule for non-IP licences to be recognised over time. However, the Board noted fundamental differences between service concession arrangements and non-IP licences.  A service concession arrangement provides an operator with a right to access an asset that is controlled by the public sector.  A licence is a right to use IP or non-IP that is not captured by AASB 16, or a right to perform, which provides significantly more control of the asset or the right to perform to the licensee, than is provided in a service concession arrangement.  In a service concession arrangement, the public sector grantor capitalises an asset as part of the arrangement as it is considered a financing transaction in substance, and not a licence.  The Board considered that recognising revenue immediately (rather than a liability) on the recognition of a service concession asset at fair value being current replacement cost did not reflect the economic substance of the arrangement and would overstate current year financial performance and the financial position when the right to charge users of the asset has been transferred to the operator, as current replacement cost would not reflect that the future cash flows attributable to the asset had been given up by the grantor. This would not be the case for licensing arrangements as the licensor would not, in most cases, be recognising the asset giving rise to the licence in its financial statements. Accordingly, the Board does not consider it appropriate to analogise to service concession arrangements when considering the treatment of licences.

     BC96            On balance, the Board decided that AASB 1059 had not set a precedent for a rule for licences, as revenue is recognised over time for reasons specific to service concession arrangements. The Board also noted that the majority of non-IP licences would be addressed by the practical expedients for short-term and low-value licences. Further, the Board noted that the disagreement with the application of AASB 15 (noted in paragraph BC84) related primarily to casino and gaming licences. The