Responses to the IFRIC draft demonstrate strong opposition to the 'control' approach, with a 'risk and rewards' approach being preferred. The principles surrounding the 'rights and obligations' approach appear to have considerable merit and may well reflect a compromise with the added advantages of recognising emerging assets as well as taking into account all assets and liabilities of the respective parties. As previously referred to, the 'risk and rewards' approach, which has been endorsed for use within Australia, does not take into account all major risks that could arise from contractual obligations. Measurement of emerging assets will require refinement under such an approach.
Given the diversity of opinions expressed about a proposed accounting standard for PPPs, it appears premature for a new accounting standard to be issued in the near future, particularly given the pending development of a new leasing standard. The 'rights and obligations' approach to determining accounting for PPP arrangements is a good option for this complex area of accounting and merits further consideration. Accordingly, the Committee encourages the Department of Treasury and Finance, in conjunction with other interested parties within Australia, to encourage the International Accounting Standards Board to further examine this option prior to formalising a new International Financial Reporting Standard, which would be applicable to the Victorian public sector.
The Committee will view with interest further developments on this important issue, especially given the impact of these multi million dollar developments on state finances and the potential for assets and liabilities of the state to be misrepresented in financial reports. At the date of this report, there had been no further developments on the new standard.