AASB 1059 - Service Concession Arrangements: Grantors - July 2017

This Australian Accounting Standard (AASB 1059) sets out how public sector entities (government bodies) must account for service concession arrangements — commonly known as public-private partnerships or PPPs. These are deals where a private company (the operator) builds or upgrades public infrastructure (like roads, hospitals, or prisons) and then operates it for a set period.

What the standard does:

• Requires the grantor to recognise assets it controls — If the government body controls the infrastructure (determining what services are provided, to whom, and at what price, plus keeping significant residual value), it must record that asset on its books — even if the private operator built it.

• Requires matching liabilities — When the grantor recognises an asset, it must also recognise a liability representing what it owes the operator. This could be:

  • A financial liability (if the government promises to pay cash), or
  • A revenue liability (if the government lets the operator collect tolls or fees from users instead).

• Mandates specific measurement — Service concession assets are measured at current replacement cost (what it would cost to rebuild the asset today), not market value or discounted cash flows.