A look at service concession arrangements by the grantor

What is the purpose or objective for the issuance of MPSAS 32 Service Concession Arrangements - Grantor?

To replace Interpretation 12 of the International Financial Reporting Interpretations Committee, Service Concession Arrangements (IFRIC 12) which sets out the accounting requirements for the private sector operator in a service concession arrangement for public sector entities which are usually the grantor in service concession arrangement

To provide principles for recognition of concession asset and terminology in the accounting for service concession arrangements for the operator

To mirror Interpretation 12 of the International Financial Reporting Interpretations Committee, Service Concession Arrangements (IFRIC 12) which sets out the accounting requirements for the private sector operator in a service concession arrangement, but for public sector entities which are usually the grantor in service concession arrangement

To deal with the accounting issues of the operator, and as such MPSAS 32 addresses the issues identified in IFRIC 12 from the operator's point of view

Which of the following best defines a service concession arrangement in accordance with MPSAS 32?

A legislative by the grantor (a public sector entity) in which stipulates that the operator uses the service concession asset to provide a public service on behalf of the grantor for a specified period of time and the operator is compensated for its services over the period of the service concession arrangement

A binding arrangement between two grantors (usually public sector entities) in which the grantors use the service concession asset to provide a public service on behalf of the federal or state government for a specified period of time and the grantors are compensated for its services over the period of the service concession arrangement

A binding arrangement between two or more operators (usually private sector entities) in which the operators use the service concession asset to provide a public service on behalf of the federal or state government for a specified period of time and the operators are compensated for its services over the period of the service concession arrangement

A binding arrangement between a grantor and an operator (usually a private sector entity) in which the operator uses the service concession asset to provide a public service on behalf of the grantor for a specified period of time and the operator is compensated for its services over the period of the service concession arrangement

Which of the following is NOT a common feature of a service concession arrangement?

The arrangement is governed by a legislature that sets out performance standards, mechanisms for adjusting prices, and arrangements for arbitrating disputes

The arrangement sets the initial prices to be levied by the operator and regulates price revisions over the period of the service concession arrangement

The operator is obliged to hand over the service concession asset to the grantor in a specified condition at the end of the period of the arrangement, for little or no incremental consideration, irrespective of which party initially financed it

The operator is responsible for at least some of the management of the service concession asset and related services and does not merely act as an agent on behalf of the grantor

Service concession arrangements commonly evolve around assets, known as service concession assets. It is an asset used to provide public services in a service concession arrangement that is provided by the operator which the operator constructs, develops, or acquires from a third party or is an existing asset of the operator. It could also be provided by the grantor which is an existing asset of the grantor or is an upgrade to an existing asset of the grantor. Which of the following are common examples of service concession assets?

Highways, airports, sea ports, water distribution facilities, energy supply and telecommunication networks and other non-current tangible or intangible assets used to generate income and earn economic profits for the government

Highways, airports, sea ports, water distribution facilities, energy supply and telecommunication networks and other non-current tangible or intangible assets used for administrative purposes in the private sector

Government administrative buildings, court houses, military fort and base, law enforcement offices used for administrative purposes in delivering public services

Highways, airports, sea ports, water distribution facilities, energy supply and telecommunication networks and other non-current tangible or intangible assets used for administrative purposes in delivering public services

What are the criteria or requirements for a grantor to recognise a service concession asset in accordance with MPSAS 32?

For non whole-of-life assets, the grantor only need to regulate or control what services the operator must provide with the asset, to whom it must provide them, and at what price

Except for whole-of-life assets, the grantor regulates or controls what services the operator must provide with the asset, to whom it must provide them, and at what price; and it controls any significant residual interest in the asset; through ownership, beneficial entitlement or otherwise, at the end of the term of the arrangement

The grantor has significant influence on what services the operator must provide with the asset, to whom it must provide them, and at what price; and it has some residual interest in the asset; through beneficial entitlement at the end of the term of the arrangement

For non whole-of-life assets, the grantor only need to control any significant residual interest in the asset; through ownership, beneficial entitlement or otherwise, at the end of the term of the arrangement

What is the measurement for initial recognition of service concession assets?

They are initially at fair value. In particular, fair value is used to determine the cost of existing assets of a grantor that meets the conditions of a service concession asset as set out in MPSAS 32

They are initially at a nominal value of RM1. In particular, the nominal value is used to determine the cost of existing assets of a grantor that meets the conditions of a service concession asset as set out in MPSAS 32

They are initially at its original acquisition cost. In particular, the original acquisition cost is used to determine the cost of a purchased service concession asset or the cost of any upgrades to existing assets

They are initially at fair value. In particular, fair value is used to determine the cost of a constructed or developed service concession asset or the cost of any upgrades to existing assets

The fair value of a service concession asset determined on initial recognition largely depends on the type of compensation exchanged between the grantor and the operator. How is this fair value determined?

Where payments are made by the grantor to the operator, the fair value on initial recognition of the asset represents the portion of the payments paid to the operator for the asset

Where the grantor does not make payments to the operator for the asset, the asset is accounted for in the same way as an exchange of non-monetary assets in MPSAS 16

Where payments are made by the grantor to the operator, the fair value on initial recognition of the asset is based on an amount to be determined at the discretion of an authorising body such as federal or state government

Where the grantor does not make payments to the operator for the asset, the asset is accounted for at a nominal value of RM1

The grantor recognises concession liability depending on the way the grantor compensates the operator. In exchange for the service concession asset, the grantor may compensate the operator for the service concession asset by any combination of either the Financial Liability Model and/or Grant of a Right to the Operator Model. Which of the following BEST describes the Financial Liability Model?

The grantor compensates the operator for the construction, development, acquisition, or upgrade of a service concession asset by making a predetermined series of payments

The grantor compensates the operator for the construction, development, acquisition, or upgrade of a service concession asset and related services by granting the operator the right to earn revenue from third-party users of the service concession asset or another revenue-generating asset

The grantor accounts for the liability as the unearned portion of the revenue arising from the exchange of assets between the grantor (a service concession asset) and the operator (an intangible asset)

The grantor compensates the operator for the construction, development, acquisition, or upgrade of a service concession asset by making a predetermined series of payments

The grantor's treatment of revenues and expenses depends on two models - the Financial Liability Model and/or Grant of a Right to the Operator Model. How are the revenues and expenses accounted for under the Grant of a Right to the Operator Model?

The grantor earns the benefit associated with the assets received in the service concession arrangement in exchange for the right granted to the operator over the period of the arrangement

The grantor recognises revenue and reduces the liability according to the economic substance of the service concession arrangement

The grantor allocates payments to the operator according to their substance as a reduction in the liability, a finance charge, and charges for services provided by the operator

The grantor recognises revenue based on MPSAS 23 Revenue from Non-Exchange Transactions. No revenue and related expenses are recognised for the service concession arrangement and is disclosed by way of notes in accordance with MPSAS 32

Which of the following are NOT disclosure requirements for service concession arrangements as required by MPSAS32?

A description of the arrangement

Changes in the arrangement occurring during the reporting period

Financial risk management and risk exposures relating to the service concession arrangement, including credit risk exposures

A look at service concession arrangements by the grantor

What is the purpose or objective for the issuance of MPSAS 32 Service Concession Arrangements - Grantor?

Which of the following best defines a service concession arrangement in accordance with MPSAS 32?

Which of the following is NOT a common feature of a service concession arrangement?

What are the criteria or requirements for a grantor to recognise a service concession asset in accordance with MPSAS 32?

What is the measurement for initial recognition of service concession assets?

The fair value of a service concession asset determined on initial recognition largely depends on the type of compensation exchanged between the grantor and the operator. How is this fair value determined?

The grantor's treatment of revenues and expenses depends on two models - the Financial Liability Model and/or Grant of a Right to the Operator Model. How are the revenues and expenses accounted for under the Grant of a Right to the Operator Model?

Which of the following are NOT disclosure requirements for service concession arrangements as required by MPSAS32?

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