| 34.12 | A service concession arrangement is an arrangement whereby a public sector body, or a public benefit entity (the grantor) contracts with a private sector entity (the operator) to construct (or upgrade), operate and maintain infrastructure assets for a specified period of time (concession period). The operator is paid for its services over the period of the arrangement. A common feature of a service concession arrangement is the public service nature of the obligation undertaken by the operator, whereby the arrangement contractually obliges the operator to provide services to, or on behalf of, the grantor for the benefit of the public. |
| 34.12A | Specifically an arrangement is a service concession arrangement when the following conditions apply: |
| (a) | the grantor controls or regulates what services the operator must provide using the infrastructure assets, to whom, and at what price; and |
| (b) | the grantor controls, through ownership, beneficial entitlement or otherwise, any significant residual interest in the assets at the end of the term of the arrangement. |
| Where the infrastructure assets have no significant residual value at the end of the term of the arrangement (ie the arrangement is for its entire useful life), then the arrangement shall be accounted for as a service concession if the conditions in (a) are met. |
| For the purpose of condition (b), the grantor's control over any significant residual interest should both restrict the operator's practical ability to sell or pledge the infrastructure assets and give the grantor a continuing right of use throughout the concession period. [AMD 553] |
| 34.12B | A service concession arrangement shall be accounted for in accordance with the requirements of paragraphs 34.12E to 34.16C. [AMD 554] |
| 34.12C | A service concession arrangement may contain a group of contracts and sub-arrangements as elements of the service concession arrangement as a whole. Such an arrangement shall be treated as a whole when the group of contracts and sub-arrangements are linked in such a way that the commercial effect cannot be understood without reference to them as a whole. Accordingly, the contractual terms of certain contracts or arrangements may meet both the scope requirements of paragraphs 34.12 and 34.12A, and Section 20 Leases. Where this is the case, the requirements of this section shall prevail. |
| 34.12D | Where an arrangement does not meet the requirements of paragraphs 34.12 and 34.12A, it shall be accounted for in accordance with Section 17 Property, Plant and Equipment, Section 18 Intangible Assets other than Goodwill, Section 20 or Section 23 Revenue, based on the nature of the arrangement. |
| AMD 553 Amendment Paragraph 34.12A amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017) Effective date 01/01/2019 Previous text 34.12A Specifically an arrangement is a service concession arrangement when the following conditions apply: (a) the grantor controls or regulates what services the operator must provide using the infrastructure assets, to whom, and at what price; and (b) the grantor controls, through ownership, beneficial entitlement or otherwise, any significant residual interest in the assets at the end of the term of the arrangement. Where the infrastructure assets have no significant residual value at the end of the term of the arrangement (ie the arrangement is for its entire useful life), then the arrangement shall be accounted for as a service concession if the conditions in (a) are met. For the purpose of condition (b), the grantor's control over any significant residual interest should both restrict the operator's practical ability to sell or pledge the infrastructure assets and give the grantor a continuing right of use throughout the concession period. |
| AMD 554 Amendment Paragraph 34.12B amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017) Effective date 01/01/2019 Previous text 34.12B A service concession arrangement shall be accounted for in accordance with the requirements of paragraphs 34.12E to 34.16A. |
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