ASC 853-10
Overall
853 Service Concession Arrangements
Source downloaded: .Record version 98d829ab11a3. Effective date must be checked in the source.
ASC 853-10 governs how an operating entity accounts for a service concession arrangement — a contract in which a public-sector grantor engages the operating entity to operate (and possibly construct, upgrade, or maintain) the grantor's infrastructure, such as airports, roads, bridges, prisons, or hospitals. The arrangement is in scope only if the grantor controls or can modify/approve the services, the recipients, and the price, and controls any residual interest in the infrastructure at the end of the term (853-10-15-3). In scope, the grantor is always deemed the customer of the operation services under Topic 606, the infrastructure is not recognized as the operating entity's PP&E, and the arrangement is not a lease under Topic 842 (853-10-25-1 through 25-2).
Key points (7)
- A service concession arrangement is an arrangement in which an operating entity operates, and may also maintain, construct, or significantly upgrade, a grantor's infrastructure used to provide a public service for a specified period (853-10-05-1).
- Consideration may come from grantor payments (as services are performed or over an extended period), from the right to charge third-party users, or from an unconditional grantor guarantee of a minimum payment if user fees fall short of a threshold (853-10-05-2).
- The Topic applies only where the grantor is a public-sector entity (a governmental body or an entity delegated responsibility to provide public service) and both conditions in 853-10-15-3 exist: grantor control over the services, recipients, and price; and grantor control of any residual interest in the infrastructure at the end of the term.
- An arrangement meeting the scope criteria of Topic 980 on regulated operations applies Topic 980 rather than this Topic (853-10-15-4).
- Revenue is accounted for under Topic 606, and the grantor is considered the customer of the operation services in all cases within this Topic's scope (853-10-25-1).
- The infrastructure subject to an in-scope service concession arrangement is not recognized as property, plant, and equipment of the operating entity, and the arrangement is not within the scope of Topic 842 on leases (853-10-25-2).
- Other aspects of the arrangement (e.g., construction or upgrade services, receivables, guarantees) are accounted for by reference to other Topics (853-10-25-1).
For students. The tested point is scope plus two bright-line outcomes: the grantor — not the driving public paying tolls — is the Topic 606 customer, and the operating entity never books the infrastructure as its own PP&E or as a lease. A common misunderstanding is treating third-party user fees as revenue from the public, or analogizing the arrangement to a lease of the infrastructure.
service concession arrangementpublic-sector grantoroperating entityinfrastructurecontrol over services and priceresidual interestgrantor as customeroperation services
Machine-generated study aid for ASC 853-10. Check the source paragraphs below.
853-10-00Status
Source downloaded: .Record version 832e53336362. Effective date must be checked in the source.
853-10-00-1
The following table identifies the changes made to this Subtopic.
| Paragraph | Action | Accounting Standards Update | Date |
| Not-for-Profit Entity | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| Public Business Entity | Added | Accounting Standards Update No. 2017-10 | 05/16/2017 |
| Public Business Entity | Amended | Maintenance Update 2016-11 (PDF) | 06/27/2016 |
| Public Business Entity | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| 853-10-05-1 | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| 853-10-05-2 | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| Added | Accounting Standards Update No. 2014-05 | 01/23/2014 | |
| 853-10-25-1 | Amended | Accounting Standards Update No. 2017-10 | 05/16/2017 |
| 853-10-25-1 | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| 853-10-25-2 | Amended | Accounting Standards Update No. 2016-02 | 02/25/2016 |
| 853-10-25-2 | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| 853-10-65-1 | Added | Accounting Standards Update No. 2014-05 | 01/23/2014 |
| 853-10-65-2 | Added | Accounting Standards Update No. 2017-10 | 05/16/2017 |
853-10-05Overview and Background
Source downloaded: .Record version 1c5921a02c5c. Effective date must be checked in the source.
853-10-05-1
A service concession arrangement is an arrangement between a grantor and an operating entity for which the terms provide that the operating entity will operate the grantor's infrastructure (for example, airports, roads, bridges, tunnels, prisons, and hospitals) for a specified period of time. The operating entity may also maintain the infrastructure. The infrastructure already may exist or may be constructed by the operating entity during the period of the service concession arrangement. If the infrastructure already exists, the operating entity may be required to provide significant upgrades as part of the arrangement. Service concession arrangements can take many different forms.
853-10-05-2
In a typical service concession arrangement, an operating entity operates and maintains for a period of time the infrastructure of the grantor that will be used to provide a public service. In exchange, the operating entity may receive payments from the grantor to perform those services. Those payments may be paid as the services are performed or over an extended period of time. Additionally, the operating entity may be given a right to charge the public (the third-party users) to use the infrastructure. The arrangement also may contain an unconditional guarantee from the grantor under which the grantor provides a guaranteed minimum payment if the fees collected from the third-party users do not reach a specified minimum threshold. This Topic provides guidance for reporting entities when they enter into a service concession arrangement with a public sector grantor who controls or has the ability to modify or approve the services that the operating entity must provide with the infrastructure, to whom it must provide them, and at what price (which could be set within a specified range). The grantor also controls, through ownership, beneficial entitlement, or otherwise, any residual interest in the infrastructure at the end of the term of the arrangement.
853-10-15Scope and Scope Exceptions
Source downloaded: .Record version 4928ebbb2ae3. Effective date must be checked in the source.
Overall Guidance
853-10-15-1
The Scope Section of the Overall Subtopic establishes the scope for the Service Concession Arrangements Topic.
Entities
853-10-15-2
The guidance in this Topic applies to the accounting by operating entities of a service concession arrangement under which a public-sector entity grantor enters into a contract with an operating entity to operate the grantor's infrastructure. The operating entity also may provide the construction, upgrading, or maintenance services of the grantor's infrastructure.
853-10-15-3
A public-sector entity includes a governmental body or an entity to which the responsibility to provide public service has been delegated. In a service concession arrangement, both of the following conditions exist:
- aThe grantor controls or has the ability to modify or approve the services that the operating entity must provide with the infrastructure, to whom it must provide them, and at what price.
- bThe grantor controls, through ownership, beneficial entitlement, or otherwise, any residual interest in the infrastructure at the end of the term of the arrangement.
853-10-15-4
A service concession arrangement that meets the scope criteria in Topic 980 on regulated operations shall apply the guidance in that Topic and not follow the guidance in this Topic.
853-10-25Recognition
Source downloaded: .Record version 420edc08eb32. Effective date must be checked in the source.
853-10-25-1
An operating entity shall account for revenue from service concession arrangements in accordance with Topic 606 on revenue from contracts with customers. In applying Topic 606, an operating entity shall consider the grantor to be the customer of its operation services in all cases for service concession arrangements within the scope of this Topic. An operating entity shall refer to other Topics to account for the various other aspects of service concession arrangements.
The Operating Entity's Rights over the Infrastructure
853-10-25-2
The infrastructure that is the subject of a service concession arrangement within the scope of this Topic shall not be recognized as property, plant, and equipment of the operating entity. Service concession arrangements within the scope of this Topic are not within the scope of Topic 842 on leases.
853-10-65Transition and Open Effective Date Information
Source downloaded: .Record version 6139d25e80f8. Effective date must be checked in the source.
853-10-65-1
Paragraph superseded on 06/23/2016 after the end of the transition period stated in Accounting Standards Update No. 2014-05, Service Concession Arrangements (Topic 853).
853-10-65-2
Paragraph superseded on 07/20/2020 after the end of the transition period stated in Accounting Standards Update No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services.