NEWS: PPP risks disclosed in new accounting standards

NEWS: PPP risks disclosed in new accounting standards

July 25, 2017

The costs, benefits and risks of infrastructure and other public service projects will be more transparently and consistently reported to taxpayers under a new Australian accounting standard released today.

Public sector entities will soon be required to recognise assets and liabilities that relate to their public private partnerships (PPPs), following the release of Australian accounting standard, AASB 1059 Service Concession Arrangements: Grantors.

Also known as ‘service concession arrangements’, PPPs are partnerships that public sector entities enter into with the private sector to deliver public services. Typically, these partnerships involve the construction and management of assets that form part of infrastructure projects such as toll roads, hospitals and schools.

Infrastructure projects are a significant part of government budgets, with spending making up approximately $20 billion in 2016.

“Currently there is diversity in how governments have communicated their obligations and rights relating to infrastructure projects to the public,” said AASB Chair Kris Peach.
“We have responded to requests for better transparency regarding the impact of PPPs and whether they are the best use of taxpayers’ money. More infrastructure projects will be recognised on balance sheets, with a consequential increase in both assets and liabilities. We know this practice encourages increased accountability and better management,” Ms Peach commented.
Some PPPs involve the government paying the private sector operator directly and some involve the operator being permitted to collect payment directly from the public, eg collecting road tolls. The new requirements mean assets will be recognised consistently, regardless of how they are financed.

In addition, more disclosures will be made around the terms of PPP arrangements, giving taxpayers a greater understanding of the risks associated with such projects.

AASB 1059 Service Concession Arrangements: Grantors will apply to reporting periods on or after 1 January 2019. The standard is available here

Learn about Infrastructure Finance Masterclass in Sydney on October 5-6.

 

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