20 In preparing the National Accounts' balance sheet, the Office for National Statistics (ONS) currently uses the accountants' assessment of the resource accounting treatment of PFI contracts. These assessments are based on a risks and rewards approach. If the proposals in the above paragraphs are adopted for resource accounts, it is probable that the ONS will then also require information on the existing basis (i.e. the risks and rewards approach) for current and new PFI contracts.
21 Our preliminary view is that accounting information on a risks and rewards approach could be supplied using IAS 17, with the lessee in a service concession arrangement being taken to be the public sector grantor. IAS 17 sets out the criteria for recognising an asset on the lessee's balance sheet, based around risks and rewards - if a lease transfers substantially all the risks and rewards of ownership, then the leased item is to be recognised as an asset of the lessee (a finance lease). A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use the asset for a period of time. A brief overview of the factors that, individually or collectively, result in a lease being treated as a finance lease are given in Annex B.
22 Would an assessment of the accounting treatment of your PFI contracts that meet the definition of a service concession arrangement differ under IAS 17 from the approach proposed in paragraph 14? Please give examples of key projects where the treatment would differ, together with the reasons why. Would an approach that required you to assess projects under both IFRIC 12 and IAS 17 impose significant additional burdens?