- 10 Marks
PSAF – July 2023 – L2 – Q4b – International public sector accounting standards
Discuss the recognition of service concession assets under IPSAS 32 and determine whether a hostel facility qualifies as a service concession asset.
Question
A public university has engaged a private estate developer to construct a hostel for its candidates under a Build-Operate-Transfer arrangement over 25 years. Under the arrangement, the university reserves the right to fully control services the operator offers and any significant residual interest. The hostel can only be used to provide accommodation for candidates of the university. The university prepares its financial statements in compliance with the International Public Sector Accounting Standards (IPSAS). The Director of Finance is uncertain whether the hostel facility is a service concession asset or not.
Required:
i) In reference to the above, explain the term “service concession asset” under IPSAS 32: Service Concession Arrangement: Grantor. (1 mark)
ii) Discuss TWO (2) conditions necessary for the recognition of a service concession asset, and indicate whether the hostel facility qualifies for recognition under IPSAS 32. (6 marks)
iii) Outline THREE (3) disclosures that the grantor should make in the notes to the financial statements in respect of concession assets. (3 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Financial Reporting, Grantor, IPSAS 32, Public Sector, Service Concession
- Level: Level 2
- Topic: International public sector accounting standards
- Series: JULY 2023