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ASB's PFI proposals attacked, Jonah Bloom reports

Bankers, construction industry leaders, accountants and government insiders have expressed dismay at the ASB’s attempt to clarify accounting for private finance initiative (PFI).

The ASB’s amendment to FRS 5, which was published last month, seeks to determine where liabilities lie for PFI projects such as roads, prisons and hospitals, and to show them on the relevant organisation’s balance sheet.

But those opposing the amendment fear that the proposals would shift the vast majority of schemes onto the public-sector balance sheet, which is exactly what PFI was designed to avoid.

Construction industry leaders such as James Armstrong, finance director of John Laing, have already spoken out against the amendment. Tim Stone, head of PFI at KPMG, has warned that the proposals have ‘the potential to scupper PFI’. Insiders in government departments said that the proposals were unacceptable and ‘would not be adopted’.

The British Bankers Association is consulting its members over a response to the amendment. The BBA said it did not want to pre-empt its members’ responses. A spokesman said: ‘We usually welcome clarification of these issues, but it is important to look at the implications of this.’

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