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Under Appendix D of Ind AS 115 (Service Concession Arrangements), an operator that constructs/upgrades public infrastructure recognises a FINANCIAL ASSET when:
AThe grantor agrees to retain the infrastructure at the end of the concession
BThe operator obtains physical possession of the infrastructure during construction
CThe operator funds construction primarily with grantor-provided debt
DIt has an unconditional contractual right to receive cash (or a guaranteed shortfall) from the grantor — payment is enforceable irrespective of usage
Answer & Solution
Correct answer: D. It has an unconditional contractual right to receive cash (or a guaranteed shortfall) from the grantor — payment is enforceable irrespective of usage
Under Appendix D para 16 — financial asset arises when the operator has an UNCONDITIONAL right to cash. This is the case when the grantor guarantees specified/determinable amounts or guarantees a shortfall between user-collected amounts and a specified target. If instead the operator only has a licence to charge users (cash flows contingent on usage), the operator recognises an INTANGIBLE asset. Physical possession, residual rights, or funding source are not the trigger.
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