Question Tag: Grantor

i) Explanation of “Service Concession Asset” under IPSAS 32:

A service concession asset is an asset used to provide public services in a service concession arrangement, where the asset is either provided by the operator or is an existing asset of the grantor, and where the grantor controls the asset, including what services the operator must provide with the asset, to whom it must provide them, and at what price.

ii) Conditions for Recognition of a Service Concession Asset under IPSAS 32:

Under IPSAS 32, a grantor shall recognize an asset provided by the operator as a service concession asset if:

1. Control of Services: The grantor controls or regulates what services the operator must provide with the asset, to whom they must be provided, and at what price.
2. Control of Residual Interest: The grantor controls, through ownership, beneficial entitlement, or otherwise, any significant residual interest in the asset at the end of the term of the arrangement.

Application to the Hostel Facility: The hostel facility qualifies as a service concession asset because:

• The university controls the services provided by the operator (accommodation for students) and the fees charged for these services.
• The university also retains control over the residual interest in the hostel after the 25-year arrangement period.

Therefore, the hostel facility should be recognized as a service concession asset under IPSAS 32.

iii) Disclosures in the Financial Statements under IPSAS 32:

The grantor should disclose the following information in respect of service concession arrangements:

1. Description of the Arrangement: A detailed description of the service concession arrangement, including the nature of the services provided and the terms of the arrangement.
2. Significant Terms: Significant terms of the arrangement that may affect the amount, timing, and certainty of future cash flows, such as the duration of the concession, re-pricing dates, and the basis for re-pricing or renegotiation.
3. Nature and Extent of Rights and Obligations: Information on the rights to use specified assets, the rights to receive specified services, and any obligations to provide the operator with access to service concession assets or other revenue-generating assets.