GASB releases guidance on accounting for public-public partnerships
The Governmental Accounting Standards Board published guidance Monday to improve accounting and financial reporting for public-public partnership arrangements — also known as P3s — along with public-private and availability payment arrangements (APAs).
Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, offers guidance on P3 arrangements, including those that fall outside the scope of GASB’s existing guidance on those transactions, such as Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, and Statement No. 87, Leases. The new guidance also makes some improvements to the guidance previously included in Statement 60 and includes accounting and financial reporting guidance for APAs.
Statement 94 defines a P3 as an arrangement in which a government transferor contracts with a governmental or nongovernmental operator to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset — the underlying P3 asset — for a period of time in an exchange or exchange-like transaction.
Some P3s meet the definition of a service concession arrangement (SCA). The new standard carries forward the financial reporting requirements for SCAs included in Statement 60, with modifications to apply the more extensive requirements related to recognition and measurement of leases to SCAs.
P3s that meet the definition of a lease should apply the guidance in Statement 87, if the existing assets of the transferor that are not required to be improved by the operator as part of the P3 arrangement are the only underlying P3 assets and the P3s don’t meet the definition of an SCA.
The standard offers specific guidance for all other P3s from the viewpoint of both a government that transfers rights to another party and governmental operators that get those rights.
Statement 94 defines an APA as an arrangement 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.
The standard requires governments to account for APAs related to those activities and in which ownership of the asset transfers by the end of the contract as a financed purchase of the underlying infrastructure or other nonfinancial asset. It also requires a government to report an APA that’s related to operating or maintaining a nonfinancial asset as an outflow of resources (such as an expense) in the period to which the payments relate.
The standard is effective for fiscal years starting after June 15, 2022, and all reporting periods after that, but GASB is also encouraging earlier application. Given the ongoing COVID-19 pandemic and GASB’s recently added project to consider postponing the effective dates of certain pronouncements (see our story), GASB has extended the effective date for Statement 94 by one year from the date proposed in the exposure draft.