Let's Be Partners.

• Author: Levine, Michele Mark
• Position: IN PRACTICE: ACCOUNTING

For those keeping track, Government Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, has fared somewhat worse as far as longevity than most GASB pronouncements. Issued in November 2010 and effective for periods that began after December 15, 2011, GASB 60's days are numbered and its successor already ordained--although much of its spirit will live on. GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements (GASB 94), which was issued in March 2020, will supersede GASB 60 when it becomes effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. (1) The rapidity with which GASB 60 is being superseded attests to the increasing frequency and variety of ways in which governments seek to provide public services effectively and cost efficiently.

Public-Private and Public-Public Partnerships

As discussed in the August 2019 issue of Government Finance Review, (2) GASB 94 can be thought of as a cross between the prior guidance on service concession arrangements (SCAs) and GASB Statement No. 87, Leases. The definition of a public-private or public-public partnerships (PPP) in some ways parallels that of a lease, (3) while incorporating an essential element of an SCA--the required use of the underlying asset for the provision of public services. GASB 94 defines a PPP as "an arrangement in which a government (the transferor) contracts with an operator to provide public services, by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital assets (the underlying PPP asset), for a period of time in an exchange or exchangelike transaction." (4) Like for leases, either one or both parties to a PPP might be governments; the transferor will always be a government, and an operator may be either governmental or private-sector.

GASB 94 augments the prior SCA standards, incorporating a category of PPPs that are not SCAs or leases, in order to provide guidance on arrangements in which the transferor does not own or have control over the underlying PPP asset that is used for providing public services, as it would have control of the underlying asset an SCA.

The expansion in scope is limited, however, as certain PPPs that meet the requirements to be leases--and are not SCAs--are required to be accounted for as leases, following GASB 87 rather than GASB 94. (5) See Exhibit 1 for a representation of the intersection of the scopes of these two statements.

As mentioned above, much of the generally accepted accounting principles and reporting for PPPs very closely parallel those for leases, including:

* The method and provisions of the PPP agreement used in calculating the term of a PPP, and under what circumstances that term is reassessed.

* The measurement of PPP liabilities by operators, and of PPP receivables by transferors, calculated using the present value of similar types of expected future payments and using a discount rate that is determined in a similar manner. (6)

* Requirements for the amortization of the intangible right-to-use asset and deferred inflows of resources, impairments, multiple-component PPPs, and PPP modifications and terminations.

For accounting and financial reporting...