Brexit & EconomyPoliticsTreasury to act on PFI project ruling

Treasury to act on PFI project ruling

Whitehall keeps an eye on Treasury's imminent release of an accounting ruling on private finance intitiative projects

The Treasury is set to release its interpretation of a controversial
accounting ruling on private finance initiative projects.

The body’s ruling on how PFI is to be accounted for will be of wide interest
throughout Whitehall and also in local government, as civil servants fret over
the impact of PFI deals coming on balance sheet.

The
International
Financial Reporting Interpretations Committee
issued an interpretation in
2006 on how to account for long-term projects supplied to government and the
private sector.

It suggested that the current method for deciding the balance sheet position
of assets ­ determined under Treasury rules as being where the risk lies ­ will
change.

IFRIC 12 states that the deals should be on balance sheet where the public
authority is the ‘service concession grantor’ ­ effectively saying that, given
the service is their responsibility, it will have to be on their balance sheet.

But the abstruseness of the terms and the complication of the issue mean that
the Treasury’s verdict on the matter is likely to be closely followed.

The Treasury recently announced that it would be publishing its opinion in
December.

The moves will aim to introduce more certainty to the understanding of the
contracts. Application in the public sector should see a majority of projects
such as PFI deals, coming back onto government’s books, the government has
admitted.

The Treasury is set to meet with the high-level group of accountants from
both private and public sector who meet to advise it before a verdict is issued.

The
Financial
Reporting Advisory Board
, as it is known, has already urged the government
to drop its ‘risk’ assessment of PFI accounting after an exhaustive modelling
process on the Home Office and NHS accounts, among others.

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