IFRS for SMEs Leases and Service Concessions Flashcards

Under IFRS for SMEs, a service concession arrangement is one where:

Answer: A private operator uses public infrastructure to provide a public service under a contract with a grantor

IFRS for SMEs addresses service concession arrangements where a private-sector operator is paid to construct, operate, and maintain infrastructure used to deliver a public service.

Under IFRS for SMEs, the operator in a service concession arrangement should NOT recognize the infrastructure as:

Answer: Property, plant and equipment

The operator in a service concession does not recognize the infrastructure as its own PP&E because it does not control the infrastructure—it is controlled by the grantor.

Under IFRS for SMEs, when an operator in a service concession receives an unconditional contractual right to receive cash from the grantor, it recognizes:

Answer: A financial asset

When the operator has an unconditional right to receive specified amounts from the grantor, it recognizes a financial asset because the cash flows do not depend on usage.

Under IFRS for SMEs, when an operator in a service concession receives a right to charge users of the public service, it recognizes:

Answer: An intangible asset

When the operator is paid by charging users rather than receiving guaranteed amounts from the grantor, it recognizes an intangible asset (the licence to charge users).

Under IFRS for SMEs, a lessee's finance lease liability is subsequently reduced by:

Answer: The principal component of each lease payment

Each lease payment is split into a finance charge (recognized in profit or loss) and a principal repayment that reduces the outstanding lease liability.

Under IFRS for SMEs, how is the depreciation of a finance-leased asset determined when ownership will transfer at end of lease?

Answer: Over the useful life of the asset

If ownership is expected to transfer, the asset is depreciated over its useful life; otherwise, it is depreciated over the shorter of the lease term and useful life.