The Eurostat treatment of PPPs serves to measure whether and when under current Eurostat rules (a) the whole of the capital investment of a given PPP project should be computed as public expenditure and therefore added to government deficit/surplus and (b) the totality of the debt issued to finance the investment should be reported as government debt and added to general government debt.
The Eurostat treatment of PPPs requires the classification (as "on" or "off" government balance sheet) of assets of individual PPP projects in accordance with ESA 95. In theory, this classification should be based on the aggregate data composing the statistical treatment of PPPs in National Accounts. In practice, national statistical offices normally rely on adjusted data derived from the accounting treatment of PPPs.
Under ESA 95, the balance sheet reporting of PPP assets and impact on deficit and debt is aligned with that of leases:
• If the non-government partner does not bear most of the project risk, the statistical treatment of the PPP assets should be similar to that of "financial leases" under ESA 95 (i.e. on the government balance sheet). The initial capital investment will have a negative impact on the deficit/surplus and on the debt because it will be treated as an "imputed loan" from the nongovernment partner (i.e. an indirect borrowing by the public sector). The payment of the service charge (if any) made by the government to the nongovernment partner will have an impact on the deficit/surplus only for the part relating to purchase of the services and "imputed interest".
• If the non-government partner bears most of the project risk, the statistical treatment of the PPP assets should be similar to that of an "operating lease" under ESA 95 (i.e. off the government balance sheet). The initial capital investment will not have an impact on the deficit/surplus and will not have an impact on the debt. The payment of the service charge (if any) made by the government to the non-government partner will have an impact on deficit/surplus only for the part relating to purchase of the services but not as "imputed interest".