326 Government Finance Statistics Manual 2014
Public Sector Accounting Standards (IPSASs) con-
siderations of control of the asset include aspects of
risks and rewards, and should, in principle, lead to the
same conclusions on economic ownership. Box A4.5
pre sents a brief discussion on how some countries
apply, in practice, the concept of economic ownership
related to PPPs.Statistical Treatment
A4.64 Th e following description of the statistical
treatment of PPPs is based on the guidelines prescrib ed
in the 2008 SNA.^17 If the government is considered
the economic owner of the asset(s) during the con-
tract period but does not make any explicit payment
at the beginning of the contract, a transaction must
be im puted to cover the acquisition of the asset(s).
Th e rec ording of these depends on the specifi c con-
tract pro visions, how they are interpreted, and possi-
bly other factors. Most frequently, these contracts will
be rec orded as the acquisition of the asset through an
imputed fi nancial lease because of the similarity with
actual fi nancial leases. In other cases, for example, a
loan that equals the market value of the asset at acqui-
sition could be imputed, the actual govern ment pay-
ments to the private corporation could be partitioned,(^17) Th e PSDS Guide presents examples of the recording of fi nan cial
leases (see Box 4.11) and the recording of debt and fl ows arising
from PPPs (see Box 4.16).
Box A4.5 Practical Applications of the Economic Ownership Concept
To operationalize the criteria for economic ownership—that is, whether the majority of risks and rewards accrue to
government or to the private corporation—countries have followed different approaches.
Under Eurostat’s guidelines to its member states, a suffi cient condition for a PPP to be excluded from government’s
accounts has been that the private corporation bears the construction risk in the project and either the availability or
the demand risks in using the asset in production. In 2010, Eurostat clarifi ed how other elements, in addition to these
three principal risk categories, should be analyzed to deter mine the distribution of risks between the public and private
sectors—notably: the existence and scope of grantor guaran tees; majority fi nancing by the grantor of capital cost dur-
ing the construction phase; and fi nancial aspects of termination clauses (see Manual on Government Defi cit and Debt –
Implementation of ESA 95, 2012 Edition, section VI.5).
Some countries are following internationally accepted ac counting standards (e.g., IPSAS) applicable to fi nancial leases
(see paragraphs A4.10–A4.15). If a PPP con tract is deemed to be a fi nancial lease, an asset and liability are recorded on
the public sector unit’s balance sheet, inte rest and depreciation are recorded as operating expenses, and amortization is
recorded as a transaction in fi nancial assets and liabilities. IPSASs treat a lease as a fi nancial lease to the extent that the
following criteria are met: (i) the con tract period covers most of the useful life of the asset; (ii) the asset is transferred
to the lessee (the public sector unit in this case) at the end of the contract; (iii) the lessee can purchase the asset at a
bargain price at the end of the contract; (iv) the present value of payments pre scribed in the contract is close to the fair
market value of the asset; and (v) the asset is useful mainly to the lessee.
so that a portion of each payment repre sents the re-
payment of the loan (see paragraphs A4.10–A4.15),
and the remainder could represent an expense for use
of goods or services, subsidies, etc., in accordance with
the contract.
A4.65 If the private corporation is considered the
economic owner of the asset(s) during the contract
period, any debt associated with the acquisition of
the asset(s) should be attributed to the private corpo-
ration. Normally, the government obtains legal and
economic ownership of the assets at the end of the
contract without any signifi cant payment. However,
two ap proaches are possible to account for the acqui-
sition of the asset(s) by government:
- Over the contract period, government gradually
builds up a fi nancial claim (e.g., other accounts
receivable) and the private corporation gradually
accrues a corresponding liability (e.g., other ac-
counts payable), such that both values are equal
to the residual value of the assets at the end of the
contract period. At the end of the contract period,
government records the acquisition of the asset,
with a reduction in the fi nancial claim (other ac-
counts receivable) as the counterpart entry. Th e
other unit records the disposal of the asset, with a
reduction in the liability (other accounts payable)
as the counterpart entry. Implementing this ap-
proach may be diffi cult because it requires new