As part of a service concession arrangement with a private firm involving operation of a city car park, a government agrees to incur certain future maintenance costs. If the present value of the consideration paid and to be paid to the government exceeds the present value of the maintenance costs to be incurred by the government, how, if at all, should the government report the "gain"?
A) Immediate recognition of revenue.
B) Deferred inflow of resources, and recognize revenue in a systematic and rational manner over the term of the arrangement.
C) Current liability.
D) A gain should not be reported; only a loss.

Question

Quizplus · Accepted Answer

Deferred inflow of resources, and recognize revenue in a systematic and rational manner over the term of the arrangement, is the correct approach. This method aligns with the principle of matching revenues with the periods in which they are earned, especially in cases where the government has an ongoing obligation over the term of the arrangement.

As Part of a Service Concession Arrangement with a Private