In November 2010, the Governmental Accounting Standards Board (GASB) issued final guidance on the appropriate accounting and financial reporting for service concession arrangements (SCAs), commonly known as public-private (or public-public) partnerships (P3s). This new guidance, in the form of GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, is scheduled to take effect no later than for the fiscal year that ends December 31, 2012.
BACKGROUND AND SCOPE
An SCA is an arrangement whereby a government (transferor) turns over the operation of one of its capital assets (most often infrastructure) to a third-party operator in exchange for some form of consideration. The operator is then compensated from related fees and charges. Examples of an SCA would include:
* An arrangement to build a facility that will belong to the government in return for the right to collect fees from third parties;
* An arrangement to provide significant consideration to the government in return for the right to collect fees from third parties in connection with an existing facility; and
* An arrangement to build a facility that will be conveyed to the government at the end of the contract in return for the right to collect fees from third parties.
The new guidance applies to government-wide and proprietary fund financial statements, but not to the financial statements of governmental funds.
GASB Statement No. 60 directs that the capital asset underlying an SCA be treated like any other capital asset. If the operator constructs a new facility for the transferor (or improves an existing facility), the new facility (or improvement) should be reported at fair value as of the date it is placed into operation. If consideration from the operator takes the form of an installment contract, the contract should be reported as an asset at its discounted present value.
The transferor should report a liability for the present value of any significant obligation to sacrifice financial resources that meets either of the following criteria:
* The obligation relates directly to the...