IPSASB: Current guidelines in

IPSASs for recording PPPs

Ian Carruthers
IPSASB Chair

IMF Government Finance Statistics

Advisory Committee

Washington, D.C.
15th March 2017

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What is a Service Concession Arrangement (also
known as a Public-Private Partnership or PPP)?

• The operator uses the service

A binding concession asset to provide a public
arrangement service on behalf of the grantor for a
between a specified period of time; and
grantor and
an operator • The operator is compensated for its
in which services over the period of the service
concession arrangement

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Service Concession Asset

An asset used to
provide public
services in a
service concession
arrangement

Is provided by the Is provided by the

operator grantor

The operator
constructs, Is an upgrade to an
Is an existing asset Is an existing asset
develops or existing asset of the
of the operator for the grantor
acquires form a grantor
third party

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History – “Risks and Rewards” approach

• A party will have an asset of the property where it has:

– Access to the benefits [rewards] of the property; and
– Exposure to the risks inherent in those benefits
• Where that party is the purchaser, it will have a
corresponding liability to pay the operator for the property
(where this is required by the contract)

• Based on UK FRS 5, Application Note F

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Current – “Control” approach

This Interpretation applies to public-to-private service

concession arrangements if:
(a) the grantor controls or regulates what services the
operator must provide with the infrastructure, to whom
it must provide them, and at what price; and
(b) the grantor controls—through ownership, beneficial
entitlement or otherwise—any significant residual
interest in the infrastructure at the end of the term of
the arrangement.
IFRIC 12, Service Concession Arrangements

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Accounting (IFRIC 12)

Operator

• Do not recognize infrastructure (physical assets)

• Recognize asset for contract costs
• Recognize revenue
• Financial asset
• Intangible asset (right to charge users)

Grantor

• Not addressed in IFRIC 12

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Grantor Accounting – Mirroring IFRIC 12

Operator Grantor
Do not recognize Recognize
physical assets physical assets
Recognize Recognize
financial asset financial liability
Recognize
?
intangible asset

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IPSAS 32–Service Concession Arrangements:
Grantor

The grantor shall recognize an asset provided by the

operator and an upgrade to an existing asset of the grantor
as a service concession asset if:
(a) The grantor controls or regulates what services the
operator must provide with the asset, to whom it must
provide them, and at what price; and
(b) The grantor controls—through ownership, beneficial
entitlement or otherwise—any significant residual
interest in the asset at the end of the term of the
arrangement.

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Grantor Accounting – IPSAS 32

Operator Grantor
Do not recognize Recognize
physical assets physical assets
Recognize Recognize
financial asset financial liability
Recognize Recognize
?
intangible asset unearned revenue

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Accounting by the Grantor

• Financial liability
– Fair value of asset
– Stream of Payments
• Reduce liability
• Finance charge (interest) Need for information
• Charge for services provided
• Unearned portion of revenue
– Fair value of revenue
• Fair value of asset

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IPSAS 32 – Financial Statements under Financial
Liability Model

Statement of Financial Position Statement of Financial

(Balance Sheet) Performance (Income Statement)

Asset  Depreciation 

Financial Liability  Interest 

Cost of
Unearned Revenue
Services


Revenue
earned

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IPSAS 32 – Financial Statements under Grant of
Right to the Operator (Unearned Revenue) Model

Statement of Financial Position Statement of Financial

(Balance Sheet) Performance (Income Statement)

Asset  Depreciation 

Financial Liability Interest

 Cost of
Unearned Revenue
Services

Revenue 
earned

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PPPs: Comparison with GFS (1)

• “The macroeconomic statistics approach is broadly

consistent with considerations listed by the International
Public Sector Accounting Standards Board (IPSASB) for
the recognition and measurement of a service concession
asset.”

• However…

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PPPs: Comparison with GFS (2)

IPSAS 32 GFSM 2014

Recognition based on control Recognition based on risk and rewards
Specified accounting where grantor Imputed transaction where grantor does
does not make payments (unearned not make payments (examples given
revenue) include imputed financial leases and
imputed loans)
No specific guidance if grantor does not Provides guidance where operator has
control the asset (apply other IPSASs economic ownership (two options:
instead of IPSAS 32) recognize revenue and accumulate
receivable over life of arrangement; or
recognize revenue on final transfer)
Grantor regulates price as part of Grantor usually (but not always)
control of asset regulates price

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Questions, discussion & further information

• Visit our webpage http://www.ipsasb.org/

• Or contact us by e-mail :
IPSASB Chair: [email protected]
Technical Director: [email protected]

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