Interpretation and Application of IPSAS

9 Service Concession Arrangements: Grantor

A service concession arrangement is an arrangement (usually contractual) whereby a private sector entity provides assets and related services that give the public access to major economic and social facilities. Examples include roads, schools, and telecommunication networks. Within such arrangements there are two parties – a concession operator (normally a private sector entity) and a grantor (a public sector entity), who is the party that grants the service arrangement. The operator is compensated for its services over the period of the arrangement and in return has the obligation to provide public services. At the end of the arrangement the residual interest in any assets constructed or transferred as part of the arrangement (e.g., the motorways, bridges, or telecommunication networks) is controlled by the grantor, not the operator.

The outsourcing of an entity's internal services is not a service concession, for example building maintenance and employee restaurant facilities, as these do not involve the construction or transfer of assets. Service concession arrangements have many of the characteristics of a finance lease contract (such as the transfer of a non-current asset) but also include a service arrangement. A service concession arrangement is a typical feature of public–private partnerships (PPP) (see also Alla, 2014).

Service concession arrangements are arrangements in which:

• The operator uses the service concession asset ...