Scribd Logo
Upload

Welcome to Scribd!

  • 4K views

    Grace-AST Module 10

    Uploaded by

    Devine Grace A. Maghinay
    1. A BOT arrangement is when a private entity builds infrastructure for a government entity and operates it for a period of time before transferring it back. The accounting depends on whether the consideration is a financial asset or intangible asset. 2. An example problem is provided where a company builds an airport over 2 years, operates it for 8 years, and transfers it after 10 years. The company recognizes revenue over time based on performance obligations completed each year. 3. Another example problem is provided where a company constructs a railway over 2 years, operates it for 8 years, and transfers it. The company identifies a single performance obligation for construction and recognizes revenue over the 2 year construction period based on estimates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Grace-AST Module 10

    Uploaded by

    Devine Grace A. Maghinay
    4K views5 pages
    1. A BOT arrangement is when a private entity builds infrastructure for a government entity and operates it for a period of time before transferring it back. The accounting depends on whether the consideration is a financial asset or intangible asset. 2. An example problem is provided where a company builds an airport over 2 years, operates it for 8 years, and transfers it after 10 years. The company recognizes revenue over time based on performance obligations completed each year. 3. Another example problem is provided where a company constructs a railway over 2 years, operates it for 8 years, and transfers it. The company identifies a single performance obligation for construction and recognizes revenue over the 2 year construction period based on estimates.

    Original Title

    Grace-AST module 10

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1. A BOT arrangement is when a private entity builds infrastructure for a government entity and operates it for a period of time before transferring it back. The accounting depends on whether the consideration is a financial asset or intangible asset. 2. An example problem is provided where a company builds an airport over 2 years, operates it for 8 years, and transfers it after 10 years. The company recognizes revenue over time based on performance obligations completed each year. 3. Another example problem is provided where a company constructs a railway over 2 years, operates it for 8 years, and transfers it. The company identifies a single performance obligation for construction and recognizes revenue over the 2 year construction period based on estimates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    4K views5 pages

    Grace-AST Module 10

    Uploaded by

    Devine Grace A. Maghinay
    1. A BOT arrangement is when a private entity builds infrastructure for a government entity and operates it for a period of time before transferring it back. The accounting depends on whether the consideration is a financial asset or intangible asset. 2. An example problem is provided where a company builds an airport over 2 years, operates it for 8 years, and transfers it after 10 years. The company recognizes revenue over time based on performance obligations completed each year. 3. Another example problem is provided where a company constructs a railway over 2 years, operates it for 8 years, and transfers it. The company identifies a single performance obligation for construction and recognizes revenue over the 2 year construction period based on estimates.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 5

    MODULE 10: BOT

    1. Define a Build-Operate-Transfer (BOT) arrangements that is within the scope of IFRIC Interpretation
    12 and SIC Interpretation 29.

    BOT
    IFRIC 12 SIC 29

    Grantor-regulates or Service concession


    control arrangement

    SPP Operator and a grantor disclose in


    What services the notes to the financial
    Whom it must provide statements
    What price

    Grantor controls
    through ownership

    Applies:
    *infrastructure that operators
    construct
    *existing infrastructure to which
    the grantor gives the operator
    access
    2. Differentiate the accounting procedures for a BOT arrangement depending on the type of consideration
    received by the operator.

    Consideration in the form of financial asset

    Terms of arrangement (RMC)

    Resurface Maintain and operate Construct a road

    Government pays the operator

    Asset is turned-over to the government


    at the end of the year.

    Consideration in the form of intangible asset

    Terms of arrangement (RMC)

    Resurface Maintain and operate Construct a road

    When the original surface has deteriorated below a


    specified condition

    Government grants the operator the right to


    collect toll fees from users.

    Contract ends in the year end of contract

    Partly by a financial asset and intangible asset


    Terms of arrangement (RMC)

    3. Account for BOT arrangements.


    ResurfaceHappy Co., a private
    1. Problem: Maintain andenters
    entity, operate Constructarrangement
    into a service concession a road whereby Happy
    Co. undertakes to build an airport for the government (with completion period of 2 years), operate
    and maintain the airport for 8 years after completion, and transfer the airport to the governmen
    t at the end ofWhen
    year 10.
    theInoriginal
    exchange, the has
    surface government pays below
    deteriorated happy aco. P300M per year in years 3 to 10.
    Happy Co. makes the following estimates
    specified at contract inception:
    condition

    year Contract cost Stand-alone selling price


    Construction servicesGovernment 1 grants the operator400M
    the right to Forecast cost + 30%
    2 400M
    collect toll fees from users. Forecast cost + 30%
    Operation services 3-10 10M Forecast cost + 10%
    The imputed rate of interest in the contract is 19.10%. all cash flows take place at the end of each year.
    Contract ends in the year end of contract
    What is the carrying amount if the asset reconized on the contract at the end of year 3?
    Solution

    year Performance obligation Revenue


    1 400M * 130% 520
    2 400M*130% 520
    3 10M *110% 11

    Date collection Int. income amortization Revenue PV


    1/1/x1 -
    12/31/x1 520 520
    12/31/x2 99 (99) 520 1,139
    12/31/x3 300 218 82 11 1,068

    2. Fortunato Co., a private contractor, wins a bid to construct a car park for the government (with
    completion period of 2 years), operate and maintain the car park for the succeeding 8 years and
    turnover the car park to the government at the end of the 10th year. In exchange, the government
    grants Fortunato Co. the right to collect fees from car park users during the operation period. At
    contract inception, Fortunato Co. identifies s single performance obligation for the construction
    services and makes the following estimates:

    year Contract cost Stand-alone selling price


    Construction services 1 400M Forecast cost + 30%
    2 400M Forecast cost + 30%
    Operation services 3-10 10M N/A
    At the start of year 1, FURTONATO co. obtains a 5-year, 10%, P100M bank loan to help finance the
    arrangement. The principla on the loan matures in lump sum but interest are due annually every year – end.

    How much profit (loss) is recognized in year 2?


    Solution:
    Year 1 Construction services (400M x 130%) 520M
    Borrowing costs (100M x 10%) 10M
    Year 2 Construction services (400M x 130%) 520M
    Borrowing costs (100M x 10%) 10M
    CA of intangible asset at the end of Year 2 1,060B/8 = 132.5M
    Amortization expense

    Revenue (400m*130%) 520M


    Contract cost (400M)
    Amortization expense (132.5M)
    Loss (12.5M)

    3. Fortunato Co., a private contractor, wins a bid to construct a railway for the government. The terms of the
    arrangement are as follows:
     Fortunato Co. (operator) shall construct the railway within 2 years and operate it for 8 years after the
    completion.
     In exchange, the government grants fortunate Co. the right to collects fees from the railroad users in
    years 3 to 10.
     The contract ends in year 10.

    At contract inception, Fortunate Co. identifies a single performance obligation for the construction services.
    Fortunate Co. makes the following estimates:

    years Contract cost Stand-alone selling price


    Construction services 1-2 15M per year Forecast cost + 20%
    Operation services 3-10 5M per year N/A
    Fortunate Co. forecasts that the number of railways users will remain constant over the duration of the contract
    and that railway fess of P20M will be collected in each of Tears 3-10.

    How much revenue from the services is recognized in year 1?

    Solution:
    Construction cost 15M*120% = 18M

    4. Nourish your souls


    Building assets for publicity
    Is one way to benefit our community
    And such as building for your own futurity
    Is one way to lead your life to prosperity

    Operating on new projects isn't quite an easy assignment


    Trials and temptations are always our inner opponent
    To overcome requires full responsibility and management
    To defeat the jaws of life's most dangerous experiment
    Transferring is the final and achievable task of all
    It is the after of the results of your life's common battle
    But one should never forget their assigned role
    That we should always in God be forever thankful

    5. Quiz
    I learned that in getting the carrying amount you have to use the amortization table.S

    You might also like