Public-Private and Public-Public Partnerships and Availability Payment Arrangements

The Governmental Accounting Standards Board (GASB) issued a standard that provides guidance on the accounting and financial reporting for public-private and public-public partnership arrangements (PPPs) and availability payment arrangements (APAs).

Training Resources

Accounting and Reporting Impact
PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. 

Some PPPs meet the definition of a service concession arrangement (SCA), which the Board defines in this Statement as a PPP in which (1) the operator collects and is compensated by fees from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to a significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement.

This Statement also provides guidance for accounting and financial reporting
for availability payment arrangements (APAs). As defined in this Statement, an
APA is an arrangement in which a government compensates an operator for
services that may include designing, constructing, financing, maintaining, or
operating an underlying nonfinancial asset for a period of time in an exchange
or exchange-like transaction.

A transferor generally should recognize an underlying PPP asset as an asset in financial statements prepared using the economic resources measurement focus. However, in the case of an underlying PPP asset that is not owned by the transferor or is not the underlying asset of an SCA, a transferor should recognize
a receivable measured based on the operator’s estimated carrying value of the underlying PPP asset as of the expected date of the transfer in ownership. In addition, a transferor should recognize a receivable for installment payments, if any, to be received from the operator in relation to the PPP.

A transferor also should recognize a deferred inflow of resources for the consideration received or to be received by the transferor as part of the PPP. Revenue should be recognized by a transferor in a systematic and rational manner over the PPP term.

This Statement requires a transferor to recognize a receivable for installment
payments and a deferred inflow of resources to account for a PPP in financial
statements prepared using the current financial resources measurement focus.
Governmental fund revenue would be recognized in a systematic and rational
manner over the PPP term.