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5 May. 2021

Fatal-Flaw Review draft: Modified Retrospective Transition Approach for Service Concession Grantors

A Fatal-Flaw Review draft version of an amending Standard Amendments to Australian Accounting Standards – Modified Retrospective Transition Approach for Service Concession Grantors is open for comment until Friday, 4 June 2021.

The AASB is proposing to amend the modified retrospective method for measuring the Grant of a Right to the Operator (GORTO) liability set out in paragraph C4(c) of AASB 1059 Service Concession Arrangements: Grantors, so that the GORTO liability is initially measured based on the fair value (current replacement cost) of the service concession asset at the date of initial application, adjusted by:

(a) deducting the carrying amount of any consideration paid by the grantor to the operator recognised as an asset;

(b) adjusting the resulting amount to reflect the remaining period of the service concession arrangement relative to the total period of the arrangement; and then

(c) deducting any outstanding related financial liabilities.

The AASB made this decision to address an issue raised by a stakeholder that paragraph C4(c) does not specify how financial contributions made by the grantor to the operator prior to the date of initial application are to be treated when measuring the GORTO liability under the modified retrospective transition approach.

The final amending Standard is expected to be released prior to 30 June 2021, which is the end of the typical first mandatory annual reporting year under AASB 1059, unless adopted earlier.