PFI guidelines set

After a series of major rows last year, the Treasury and the Accounting Standards Board last week appeared to have settled their differences over accounting guidelines for private finance initiatives.

The ASB issued an application note for FRS 5 which took effect in December.

It required PFI contracts to be divided into their constituent elements, so the party carrying the associated risks shows related assets and liabilities on its balance sheet.

Last week’s publication of the Treasury guide is designed to help public-sector accountants apply those principles.

Deloitte & Touche technical partner Ken Wild – head of the ASB’s PFI working party – welcomed the Treasury guidance.

‘Although the consultation period is shorter than I normally would like, it seems to me to be an honest attempt to work within the ASB framework.

It has rephrased it in ways that people who are not expert accountants will be able to understand,’ he said.

‘There is a danger, however, that in making the guidance so detailed, people will concentrate on the detail and not on the practicalities of the note itself.’

The guidance note appeared as Scotland’s Moray council announced a #12.5m PFI deal with IT company ICL to help the council connect to the government’s National Grid for Learning.

Carolyn Williamson, assistant Moray chief financial officer, said the contract was placed before the note was published, so it would be accounted for under the Treasury’s interim guidance on PFI.

‘I don’t think there’s much change,’ she said. ‘The deal is structured very much off-balance sheet and hinges on stringent service level agreements built into the project. There is a real chance ICL could receive no payment if it does not achieve the levels we require.’

As a result of the deal, the 1,000 PCs and network equipment installed in the schools will belong to ICL.