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IFRIC 12 Service Concession Arrangements
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IFRIC 12 SCA_External Users
Terms
If the operator is paid for the construction services partly by a financial asset and partly by an intangible asset it is necessary to account separately for each component of the operator’s consideration.
The consideration received or receivable for both components shall be recognized initially at the fair value of the consideration received or receivable.
An arrangement is described as a "build-operate-transfer" service concession arrangement if the operator constructs the infrastructure used to provide the public service, operates and maintains the infrastructure for a specified period of time and then transfers the residual interest in the infrastructure back to the grantor at the end of the arrangement term. (This is not an IFRIC 12 definition but a term used to describe a type of arrangement that falls within the scope of IFRIC 12.)
The operator is paid for its services over the period of the arrangement and this consideration is received from or at the direction of the grantor.
The arrangement is governed by a contract that sets out performance standards, mechanisms for adjusting prices, and arrangements for arbitrating disputes.
The operator shall recognize a financial asset to the extent that it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction services; the grantor has little, if any, discretion to avoid payment, usually because the agreement is enforceable by law.
The operator has an unconditional right to receive cash if the grantor contractually guarantees to pay the operator:
• Specified or determinable amounts; or
• The shortfall, if any, between amounts received from users of the public service and specified or determinable amounts, even if payment is contingent on the operator ensuring that the infrastructure meets specified quality or efficiency requirements.
The party that grants the service arrangement is the grantor. It is either a public sector entity, including a governmental body, or a private sector entity to which the responsibility for the service has been entrusted.
International Financial Reporting Interpretations Committee
The operator shall recognize an intangible asset to the extent that it receives a right (a license) to charge users of the public service. A right to charge users of the public service is not an unconditional right to receive cash because the amounts are contingent on the extent that the public uses the service.
The operator is responsible for the management of the infrastructure and the related services.
Both "build-operate-transfer" and "rehabilitate-operate-transfer" arrangements are also often described as a public-to-private service concession arrangements because they typically involve a private sector entity (the operator) and a public sector entity (the grantor).
(This is not an IFRIC 12 definition but a term used to describe a type of arrangement that falls within the scope of IFRIC 12.)
An arrangement is described as a "rehabilitate-operate-transfer" service concession arrangement if the grantor gives the operator the access to the infrastructure used to provide the public service to operate and maintain the infrastructure for a specified period of time and then the operator transfers the residual interest in the infrastructure back to the grantor at the end of the arrangement term.
(This is not an IFRIC 12 definition but a term used to describe a type of arrangement that falls within the scope of IFRIC 12.)
SCA involves a private sector entity (an operator) constructing the infrastructure used to provide a public service or upgrading it (for example, by increasing its capacity).
SCA also involve the private sector entity operating and maintaining that infrastructure for a specified period of time.
Here are some useful links and documents:
Session 1-Scenario Questions
Session 2-Scenario Questions
Session 3-Scenario Questions
Assessment-Handout_Bruce PLC
Assessment-Handout_Govis PLC