Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p104
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 313465–316579

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 be considered qualitatively material and might mislead users of the financial statements for a long period of time.

     BC9               The Board decided that changing the modified retrospective transition approach is justified under the AASB Not-for-Profit Entity Standard-Setting Framework (October 2020), paragraph 30(e). This is because the existing modified retrospective GORTO liability calculation – which would make no adjustment for the grantor's own contributions to a service concession asset prior to the initial application date – would appear to result in reported financial performance or financial position not reflecting economic reality.

Options for addressing the issue

     BC10            The stakeholder advised that, prior to application of AASB 1059, grantor financial contributions to service concession arrangements have been capitalised as a prepayment, which is recognised as an expense over the concession periods.

     BC11            The Board considered four possible options for amending the modified retrospective GORTO liability calculation in relation to grantor contributions prior to the initial application date. Options 1–3 differ only in what is first deducted from the fair value (current replacement cost) of the service concession asset in calculating the liability.

         * Option 1 – measure the GORTO liability by deducting the carrying amount of capitalised grantor contributions from the current replacement cost of the service concession asset as at the date of initial application; then adjusting this amount to reflect the remaining period of the service concession arrangement relative to the total period of the arrangement; and finally deducting the fair value of any related financial liability as at the date of initial application;

         * Option 2 – measure the GORTO liability by deducting the historical amounts of grantor contributions from the current replacement cost of the service concession asset as at the date of initial application; then adjusting this amount to reflect the remaining period of the service concession arrangement relative to the total period of the arrangement; and finally deducting the fair value of any related financial liability as at the date of initial application;

         * Option 3 – measure the GORTO liability by deducting the fair value of grantor contributions from the current replacement cost of the service concession asset as at the date of initial application; then adjusting this amount to reflect the remaining period of the service concession arrangement relative to the total period of the arrangement; and finally deducting the fair value of any related financial liability as at the date of initial application; and

         * Option 4 – measure the GORTO liability by