8.58 Where the existing buildings are refurbished, and the private sector, has taken on the risks and rewards of ownership, they become inextricably linked with the PPP scheme. As a result, the accounting treatment of the buildings should follow FRS5 and depend on the overall terms of the contract. Where the economic substance of the transaction is that the private sector owns the buildings, the NHSScotland body will need to account for their disposal.
8.59 Where a disposal takes place, a deferred asset (ie a benefit realised in future periods) will arise on at the point the Body ceases to have access to the risks and rewards arising from the existing estate. This is usually taken to be the commencement of the lease. The valuation of the deferred asset depends on the nature of the PPP Scheme. For example, where the Scheme involves the complete refurbishment of the buildings, then the body is in effect handing over a building shell, whose value is in all likelihood substantially less than the its value as a hospital site. It is therefore necessary to seek a market valuation prior to handover. Any change in valuation should be accounted for as accelerated depreciation, as set out at para 35.
8.60 The deferred asset should be written-off through the operating cost statement over the life of the lease. The deferred asset is included within net relevant assets for the calculation of the cost of capital charge. At the end of the primary concession period, buildings integral to the PPP Scheme will revert to the Body. As such, their estimated fair value on reversion represents a residual interest. Guidance on the relevant accounting treatment is set out at paras 68 - 81.
8.61 The economic assessment of the overall PPP scheme is sufficient for the economic assessment of any such transactions.