ASC 853-10-25-2 provides guidance on accounting for the infrastructure assets used in a service concession arrangement.

ASC 853-10-25-2

The infrastructure that is the subject of a service concession arrangement within the scope of [ASC 853] shall not be recognized as property, plant and equipment of the operating entity. Service concession arrangements within the scope of [ASC 853] are not within the scope of Topic 842 on leases.

ASC 853-10-25-2 stipulates that the operator not recognize the infrastructure asset used in the arrangement as property, plant, and equipment. This is because the operator does not have control over the asset. Rather, the operator has a right to access the grantor’s infrastructure in order to provide the services required by the arrangement. In some service concession arrangements, the operator may have title to the infrastructure assets during the contract term. Even in such cases, the operator should not capitalize those assets as property, plant, and equipment if they are part of the infrastructure controlled by the grantor.
If an operator is constructing infrastructure as part of a service concession arrangement, the related costs are typically expensed as incurred because (1) the operator is not creating an asset that it controls and (2) the costs relate to performance obligations that are satisfied or partially satisfied (the construction services). However, there may be circumstances when it is appropriate to capitalize certain costs to obtain or fulfill a contract. Refer to RR 11 for additional guidance on contract costs.
ASC 853 also stipulates that service concession arrangements are not leases because the operator does not control the use or disposition of the infrastructure and, thus, does not enjoy the exclusive benefit of the assets during the term of the arrangement.
An operator might acquire assets to be used in providing services to the grantor that are not part of the infrastructure. For example, an operator of a toll road may purchase a snow plow that will be used to clear the roads during the operation period. Operators often replace these assets multiple times over the course of the service concession arrangement. Assets that are not part of the infrastructure itself (such as the snow plow) that the operator may dispose of or replace at its discretion should be capitalized as property, plant, and equipment of the operator because they are controlled by the operator.
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