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Chapter 13
Accounting for Build-operate-transfer (BOT)

NAME: Date:
Professor: Section: Score:

QUIZ:

(#’s 1 to 9 - TRUE OR FALSE)

1. “Build-operate-transfer” is not common in the Philippines.
2. Another term for “Build-operate-transfer” is Service concession arrangement.
3. Under a BOT contract that is within the scope of IFRIC 12, the grantor is the government.
4. According to IFRIC 12, the property subject to a BOT contract shall be recognized as property,
plant and equipment by the grantee before it is relinquished to the grantor.
5. The grantor under a BOT contract that is within the scope of IFRIC 12 acts as a service provider
rather than a manufacturer.
6. IFRIC 12 applies only to construction or upgrade services but not to operation services.
7. The consideration given by the grantor to the operator under a BOT contract may be a financial
asset, an intangible asset, or partly a financial asset and partly an intangible asset. The
consideration is in the form of an intangible asset if the operator is granted an unconditional
contractual right to receive cash from the grantor.

8. If the consideration in a BOT contract is partly a financial asset and partly an intangible asset, the
operator shall account for these two components separately.

9. The operator under a BOT contract receives a backhoe from the grantor. Control over the
backhoe is transferred to the operator. The operator shall treat the backhoe as part of the
transaction price that will be recognized as revenue.

(#’s 10 to 15 - MULTIPLE CHOICE)

Fact pattern
A BOT contract has the following terms:
 Construction of an underground railway (expected completion time is 5 years).
 Maintenance and operation of the underground railway for 5 years after its completion.
 The grantor shall pay the operator ₱100M from Years 4 to 10. Payments are due at the beginning
of each year.

10. The nature of the consideration in the contract is in the form of

a. a financial asset. c. partly (a) and partly (b)
b. an intangible asset d. neither (a) nor (b)
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11. If the operator identifies two performance obligations in the contract, what would be these two
obligations?
Performance obligation 1 Performance obligation 2
a. Maintenance Operation
b. Construction Maintenance
c. Construction Maintenance and operation
d. Operation Resurfacing

12. According to IFRIC 12, the nature of the operator’s obligation in the BOT contract is
a. constructor c. service provider
b. manufacturer d. operator

13. If the operator identifies two performance obligations in the contract, which of the following
statements is true?
a. The operator allocates the cash collections to the two performance obligations, based on their
relative stand-alone selling prices.
b. The operator allocates the present value of the cash collections to the two performance
obligations, based on their relative stand-alone selling prices.
c. The operator allocates the present value of the cash collections to a single performance
obligation.
d. None of these

14. How should the operator recognize revenue from the BOT contract?
Performance obligation 1 Performance obligation 2
a. upon completion in the 5th year as services are provided
b. as collections are received as collections are received
c. based on progress billings based on measure of progress
d. based on measure of progress as services are provided

15. By the end of the 10th year of the contract, the operator would have recognized total revenue
equal to (assume a discount rate of 10%)
a. 100M x 10 years
b. 100M x PV ordinary annuity @ 10%, n=7
c. 100M x PV of 1 @ 10%, (n=3, n=4, n=5, n=6, n=7, n=8, n=9)
d. 100M x PV of 1 @ 10%, (n=4, n=5, n=6, n=7, n=8, n=9, n=10)
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