Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p106
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 319031–321960

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, an entity would need to know the estimated value of the service concession asset that the operator agreed to provide, as well as the contributions that the grantor agreed to provide to the operator. The Board was concerned that it might be difficult for auditors to obtain sufficient appropriate audit evidence to support the estimation of the fair value of the service concession asset at inception. Option 4 also does not factor in any changes to the service concession asset, such as improvements or additions to the asset between inception and the date of initial application of AASB 1059.

     BC16            The Board considered the advantages and disadvantages of each option and decided to adopt Option 1. This is because:

          (a)                    the stakeholder advised that most of the affected hybrid service concession arrangements would still be in the construction phase as at the date of initial application, so that the capitalised grantor contributions would not yet have been amortised. Therefore, the concern described in paragraph BC12 would not be a significant issue in practice;

          (b)                   deducting the carrying amount of the capitalised grantor contributions from the current replacement cost of the service concession asset conceptually is similar to the way other existing assets of the grantor are treated when calculating the grantor's liability under the general requirements in AASB 1059 paragraph 11 – when existing assets of the grantor are reclassified as service concession assets, the grantor does not recognise a liability in relation to the reclassified assets; and

          (c)                    it is the most straightforward option to apply out of the four options considered. Since the carrying amount of the capitalised contributions typically would have been subject to audit in prior periods, it is expected that affected grantors would be able to provide sufficient evidence (based on their accounting policy) to support the carrying amount of the capitalised contributions as at the date of initial application.

     BC17            The Board acknowledged that, on conceptual grounds, Option 1 might not be the most appropriate option to apply due to the concern described in paragraph BC12. However, it noted that this is not an ongoing issue, as paragraph C4(c) is not expected to be applied in any period later than the annual reporting period ending 30 June 2021, and the stakeholder advised that the concern described in paragraph BC12 does not appear to be a significant issue in practice. Since there was a need to amend the current GORTO liability calculation in paragraph C4(c)