ASC 853, Service Concession Arrangements, contains one Subtopic:
ASC 853 applies to:
[Emphasis added.]
The operating entity also may provide the construction, upgrading, or maintenance services of the grantor's infrastructure.
(ASC 853-10-15-2)
It is important to note that a service concession arrangement within the scope of ASC 853 must meet both of the following conditions:
(ASC 853-10-15-3)
A service concession arrangement meeting the scope criteria in Topic 980 on regulated operations should apply the guidance in Topic 980.
ASC 853 was established through ASU 2014-05, Service Concession Arrangements, issued in January 2014.
The guidance is effective for a public business entity for annual periods and interim periods within those annual periods beginning after December 16, 2014. For all other entities, the guidance is effective for annual periods beginning after December 15, 2014, and interim periods within those annual periods beginning after December 15, 2015. However, early adoption is permitted. The provisions should be applied on a modified retrospective basis to service concessions that exist at the beginning of the fiscal year of adoption. This approach means that the cumulative effect of applying the guidance to arrangements that exist at the beginning of the period should be recognized as an adjustment to opening retained earnings.
The ASU is a consensus of the Emerging Issues Task Force (EITF) and addresses a narrow issue. However, the existing guidance was confusing, and practice was diverse. Depending on the terms, some preparers may have concluded that a service arrangement is a lease. To bring consistency in practice, the EITF decided that the arrangements described in the ASU should not be accounted for as leases. The EITF limited the scope of the guidance to arrangements in which the grantor is a public-sector entity.
See the Appendix A, Definitions of Terms, for terms relevant to this topic: Not-for-Profit Entity, Public Business Entity
The Topic has two main provisions:
The infrastructure that the entity operates may be airports, roads, bridges, hospitals, prisons, etc. The operating entity may also provide construction or maintenance services to the grantor's infrastructure. A key feature of a service concession arrangement is that it is generally for the public good. The operator usually receives payment for the services performed over a specified time. The operator may have the right to charge users of the infrastructure. The arrangement may include unconditional guarantees for guaranteed minimum payments.
The grantor controls or has the ability to modify or approve the services provided and the price charged for the service. The grantor controls any residual interest in the infrastructure at the end of the term. This control is important in deciding the economic substance of the transaction and the reason why it is not appropriate for the operating entity to recognize a lease or property, plant, and equipment. (ASC 853-10-05-01 and 05-02)
3.142.171.253