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A Toll-Roads operator builds an expressway under a build-operate-transfer concession with the Government of Maharashtra. The contract specifies a TOLL-COLLECTION RIGHT from users; no guaranteed payment from government. Construction cost ₹110 cr; fair value of construction services ₹200 cr. Upon completion:
ARecognise inventory at ₹110 cr — to be released to revenue as tolls are collected
BRecognise a financial asset at ₹200 cr — the toll right represents a future cash claim
CRecognise an INTANGIBLE asset at ₹200 cr (fair value of construction services), with construction revenue ₹200 cr and construction cost ₹110 cr in P&L during the construction phase
DRecognise PPE at ₹110 cr (actual cost) — the operator controls the highway
Answer & Solution
Correct answer: C. Recognise an INTANGIBLE asset at ₹200 cr (fair value of construction services), with construction revenue ₹200 cr and construction cost ₹110 cr in P&L during the construction phase
Since toll collection from users is contingent on actual usage (no unconditional cash from grantor), the operator gets an INTANGIBLE asset under Appendix D. Initial measurement = fair value of construction services (₹200 cr), with the difference between construction revenue (₹200 cr) and cost (₹110 cr) flowing through P&L during construction. The intangible is amortised over the operation phase.
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