1. Leases and licences Partitioning ownership

2. Four instances Financial lease for less than whole life of the asset Lease on natural land for fixed time at the end of which landlord resumes economic ownership Lease on sub-soil asset where lessee shares resource rent from extraction with legal owner Radio spectrum/mobile phone licence case

3. First question Can a lease for less than the whole life of a fixed asset be a financial asset? 11 out of 12 responses said yes Stress on economic ownership

4. Three options Partition ownership via two distinct assets, originals and copies, premium on operating lease Use mobile phone licence conventions Two financial asset solution

5. Mobile phone criteria for sale of asset Costs and benefits assumed by licensee Up front payment Longer period Actual or de facto transferability Cancellation by issuer improbable Business and international accounting standards

6. Criteria for treatment as rent Short-term Non-transferable Detailed stipulations on use Lessor has unilateral right to terminate Payments over life of contract

7. Treatment as asset Licence is an asset separate from spectrum Licence held by lessee Spectrum always held by lessor, legal owner

8. ISWGNA Dec 2001 The ISWGNA found that there was the need for more broad-based work on the treatment of intangible assets. Eg an alternative treatment should be investigated whereby the spectrum is sold for a finite amount of time..

9. Extend mobile phone treatment? Land Extraction Spectrum

10. Two financial asset case One loan for amount lessee has to repay over length of contract Leads to interest and principal repayment every period of contract until no loan outstanding Second loan for NPV of residual value of asset No repayment of principal Interest payable but not paid so principal outstanding increases

11. Questions to Canberra Group Transferable operating lease Mobile phone solution Two financial asset solution Another For:

12. Financial lease for less than whole of asset life? 10 out of 12 say two asset solution; 4 of 10 would prefer single loan 1 no opinion 1 does not think case arises

13. Partition mineral deposit between extractor and owner? 8 chose two asset solution 1 says if there is profit sharing this is problematical 2 say lessor supplies minerals to lessee as extracted 1 no opinion

14. Land under a long lease? 9 say two asset solution 1 says conditional on radio spectrum same way Same says if paid for upfront with expectation renewal is nominal, treat as sale 2 assume up front payments rare, treat as rent

15. Mobile phone? 8 say two asset solution 2 prefer rent solution 1 existing treatment (but would prefer rent) no opinion

16. Merge loans? Can do; exposition clearer with two?

17. Way forward How does AEG react to Canberra consultation? Is this a basis for proceeding? Would worked examples help reach recommendation? Can we work towards a solution by end March?