Guidance issued: Public-private and public-public partnerships
FINANCIAL REPORTING INSIGHTS |
The Governmental Accounting Standards Board recently issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. Statement No. 94 defines public-private and public-public partnership arrangements (both referred to as PPPs) as arrangements in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use an infrastructure or other nonfinancial asset (the underlying PPP asset) for a period of time in an exchange or exchange-like transaction.
Some PPPs meet the definition of a service concession arrangement (SCA), and for those PPPs, Statement No. 94 carries forward the requirements in Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, with modifications to apply the more extensive requirements related to recognition and measurement of leases to SCAs.
For PPPs that meet the definition of a lease, but not the definition of an SCA, Statement No. 87, Leases, applies if existing assets of the transferor that are not required to be improved by the operator as part of the PPP arrangement are the only underlying PPP assets.
For all other PPPs, Statement No. 94 provides specific guidance from the perspective of both a government that transfers rights to another party and governmental operators that receive those rights.
Statement No. 94 also provides guidance for accounting and financial reporting for availability payment arrangements in which a government compensates an operator for services that may include designing, constructing, financing, maintaining or operating an underlying infrastructure or other nonfinancial asset for a period of time in an exchange or exchange-like transaction.
Statement No. 94 is effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. Earlier application is encouraged.