177 F INANC IAL Statements Sect ion 05 Annual Report 2022 NOTES TO THE F INANC I AL STATEMENTS For the year ended 31 December 2022 3. SIGNIFICANT ACCOUNTING POLICIES (contd.) Service concession contracts A substantial portion of the Group’s assets are used within the framework of concession contracts granted by several public sector customers (“grantors”). The characteristics of these contracts vary significantly depending on the country and activity concerned. In order to fall within the scope of concession contract, a contract must satisfy the following two criteria: • the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and • the grantor controls the significant residual interest in the infrastructure at the end of the term of the arrangement. Such infrastructure are not recognised in assets of the operator as property, plant and equipment but in financial assets (“financial asset model”) and/or intangible assets (“intangible asset model”) depending on the remuneration commitments given by the grantor. (i) Intangible asset model The Group applies the intangible asset model where the operator is paid by the users or where the concession grantor has not provided a contractual guarantee in respect of the amount recoverable. The intangible asset corresponds to the right granted by the concession grantor to the operator to charge users of the public service. Intangible assets resulting from the application of this policy are recorded in the statement of financial position under the heading ‘Service Concession Assets’ and are amortised, generally on a straight-line basis, over the contract term. Cash flows relating to these intangible assets are included in net cash generated from/(used in) operating activities in the consolidated statement of cash flows. Revenue associated with this intangible asset model includes: • revenue from the construction of the infrastructure on a percentage of completion basis; and • operating revenue of the infrastructure. (ii) Financial asset model The financial asset model applies when the Group has an unconditional right to receive cash or another financial asset from the grantor. In the case of concession services, the Group has such an unconditional right if the grantor contractually guarantees the payment of: • amounts specified or determined in the contract; or • the shortfall, if any, between amounts received from users of the public service and amounts specified or determined in the contract. Financial assets resulting from the application of this policy are recorded in the consolidated statement of financial position under the heading ‘operating financial assets’ and recognised at amortised cost. Cash flows relating to these operating financial assets are included in net cash generated from/(used in) operating activities in the consolidated statement of cash flow.
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