Document ID: chunk:federal_register_of_legislation:F2022C00554:body:0:p53
Version: federal_register_of_legislation:F2022C00554
Segment Type: other
Provision Reference: 
Character Range: 171451–175336

concession asset related to the resurfacing is recognised.
   2. The new component of the service concession asset related to the resurfacing is recognised in year 8. Years 9–10 reflect depreciation on this additional component (Table 7.1).
   3. The liability is increased in year 8 for the recognition of the new component of the service concession asset.
  * From year 3, opening balance less depreciation for the year (Table 7.1).

     Table 7.3  Changes in the liability (currency units)

Year                                                                                                                                                                 1     2       3       4       5       6       7       8       9       10
Balance brought forward                                                                                                                                              –     525     1,082   947     812     677     541     406     381     191
Liability recognised along with initial service concession asset *                                                                                                   525   525     –       –       –       –       –       –       –       –
Implied funding cost included in current replacement cost of asset *                                                                                                 –     32      –       –       –       –       –       –       –       –
Revenue (reduction of liability) †                                                                                                                                   –     –       (135)   (135)   (135)   (136)   (135)   (135)   (190)   (191)
Liability recognised along with replacement surface layers                                                                                                           –     –       –       –       –       –       –       110     –       –
Balance carried forward                                                                                                                                              525   1,082   947     812     677     541     406     381     191     –
NOTES:
* See paragraph IE24.
  † Revenue related to the initial liability of CU135 (CU1,082/8) in years 3–10, plus revenue related to the resurfacing liability of CU55 (CU110/2) in years 9–10.

Example 8:  Allocation of liabilities in a hybrid arrangement
     IE30              Example 8 illustrates the requirements in paragraphs 24–25 and B73–B74 for dividing a hybrid service concession arrangement by measuring the financial liability part first and then allocating the remainder of the total liability to the part related to the grant of the right to the operator.

Arrangement terms
     IE31              The relevant terms of the arrangement in the example are:

          (a)                    the operator is required to construct a road on land owned by the grantor – completing construction within two years – and maintain and operate the road to a specified standard for eighteen years (ie years 3–20);

          (b)                   the grantor is required to pay the operator CU100 each year for eight years (ie years 3–10) for making the road available to the public. These payments are intended to partially cover the cost of constructing the road. It is assumed all cash flows take place at the end of the year. The contractually specified interest rate in the arrangement is 4% per annum. The present value of the payments is CU673. However, unlike a typical loan, the grantor incurs the liability two years before cash payments commence from year 3. Consequently, the effective interest rate for the financial liability is 3.2% per annum, reflecting this timing difference. The grantor's accounting policy for the financial liability is to subsequently measure the financial liability at amortised