Essentially UK GAAP and ESA 95 both apply a risk transfer test whereas IFRS applies a control test to determine whether or not a PFI project should be on balance sheet.
IFRIC 12 determinations should still be completed and agreed with NAO/Audit Commission for the purposes of Resource Accounting.
For National Accounts and Budgeting purposes, risk tests similar to the UK GAAP Treasury Task Force Technical Note 1 ("TTF TN1") are applied.
MGDD states that the assets that underlie PFI and similar transactions can only be considered as being off the public sector balance sheet where there is strong evidence that the private sector is bearing most of the risk and reward attached to the asset in question. It was agreed that, for the purposes of simplicity, the determination should focus on the following three main categories of risk:
Demand risk; and
If the public sector carries the construction risk, then the assets are viewed as being on the public sector balance sheet for the purposes of the National Accounts.
Where the private sector holds construction risk, and one of demand or availability risk is transferred to the private sector, then the assets are not considered to be on the public sector balance sheet for National Accounts purposes.
The MGDD also clarifies that, as is consistent with UK GAAP TTF TN1, risks associated with ancillary services to the asset should not be considered. That is services which can commercially be separated from the provision of the underlying asset, should be excluded from the analysis. (See section 3.2.1 of the technical guidance note for further discussion of this point.)