Question

When a government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity, the transaction is referred to as:_______
a. A sale-leaseback agreement.
b. A capital lease.
c. An operating lease.
d. A service concession arrangement.

Answer 1

Answer: A service concession arrangement (D)

Explanation:

A service concession arrangement is an agreement whereby the government contracts with a private enterprise in order to operate, develop and maintain an infrastructural facility such as a tunnel, bridge, road, hospital, airport or prison. The government regulates and controls the kind of services the operator must provide, to whom the services are provided and at the price the services will be provided.

Concession agreements can also be between a non-governmental owner and a concessionaire, whereby the non-governmental owner gives the operator the exclusive rights to use and maintain the business for a stipulated period of time under specified conditions.