Evaluate the trade-offs between adopting the Service Concession Arrangement model versus traditional fixed asset accounting under Indian Accounting Standards (Ind AS) 115/116 in a public–private partnership (PPP) context.
Analyze how lease capitalization under Ind AS 116 affects key financial ratios, investor perceptions and regulatory returns.
Assess the implications of accounting–regulatory misalignment in tariff-based industries – specifically the exclusion of right-of-use (ROU) assets from Airports Economic Regulatory Authority of India’s (AERA) Regulatory Asset Base.
Formulate strategies for engaging with regulators or maintaining dual accounting records when accounting standards outpace regulatory frameworks.
Discuss the broader financial reporting consequences of International Financial Reporting Standards (IFRS) convergence for firms operating under public infrastructure concessions in emerging markets.
This case is set in India’s airport infrastructure sector and examines a strategic accounting and regulatory dilemma faced by Rajiv Mehta, Chief Financial Officer of a leading private airport operator. In 2023, as the airport prepared its tariff submission to the AERA, Mehta confronted an unexpected challenge arising from the adoption of Ind AS 116 (equivalent to IFRS 16). While the new lease accounting standard required recognition of ROU assets and lease liabilities in the airport’s financial statements, AERA’s tariff framework had been designed under the earlier accounting regime and provided no clear guidance on whether these lease-related costs would be recoverable through regulated tariffs. The uncertainty created potential risks relating to financial under-recovery, debt covenant pressure, investor returns and future expansion financing. Mehta had to decide whether to engage proactively with the regulator, maintain separate accounting approaches for statutory and regulatory reporting, restructure lease arrangements or accept the consequences of regulatory uncertainty. The case is designed for teaching financial reporting, infrastructure finance, regulatory economics and strategic decision-making in regulated industries.
This case is designed primarily for graduate-level students, including MBA, Executive MBA and postgraduate programs in accounting, finance, infrastructure management and public policy. It is particularly suitable for courses in Financial Reporting, Infrastructure Finance, Strategic Financial Management, Regulatory Economics and Accounting for Managers.
The case is best suited for participants with a foundational understanding of financial statements, lease accounting concepts and corporate finance. Given the regulatory and strategic dimensions of the case, it is most appropriate for intermediate to advanced learners rather than introductory accounting courses.
The case may also be effectively used in executive education programs involving finance leaders, infrastructure professionals, regulators and PPP practitioners, where discussions can focus more heavily on regulatory strategy, stakeholder management and capital allocation decisions.
CSS1: Accounting and Finance.
