8.69 In some transactions all or part of the property will pass to the NHSScotland body at the end of the contract. Where the contract specifies that this transaction should take place at market value at the date of transfer, no accounting is required until the date of transfer, as this represents future capital expenditure for the NHSScotland body.
8.70 Alternatively, where the contract specifies the amount (including zero) at which the property will be transferred to the NHSScotland body at the end of the contract, the specified amount will not necessarily correspond with the expected fair value of the residual estimated at the start of the contract. For example, the standard form contract provides that assets constructed as part of the PPP scheme should revert to the Body on expiry of the primary concession period. Primary concession periods are generally of the order of 25 - 30 years and yet the assets on reversion may have a remaining useful economic life of between 30 - 35 years. This residual useful economic life constitutes an asset which the NHSScotland body has paid for during the concession period. In accordance with Treasury Technical Note No.1 (Revised), any difference (the residual interest) must be built up over the life of the contract in order to ensure a proper allocation of payments made between the cost of services under the contract and the acquisition of the residual. At the end of the contract the accumulated balance (whether positive or negative), together with any final payment, should exactly match the estimated fair value of the residual interest.
8.71 The estimated fair value on reversion (EFVR) of the residual interest dictates the proportionate split of the annual unitary payment between revenue and capital. It is essential from the perspective of the NHS as a whole that this initial valuation is performed in accordance with common guidance and standards. Valuations should therefore only be sought from the AV. Guidance on the valuation of residual assets is provided by the SGHD. The valuation of the residual interest can only be performed with any reasonable accuracy once the precise specifications and lifecycles of the building's components are known. For the purposes of full business case (FBC) approval, Bodies and their advisers should assume that the value of the residual interest at reversion will approximate to the building's depreciated replacement cost at reversion. The value at which the residual interest is recognised in Bodies' financial statements should only be based on the valuation given.
8.72 The residual interest should be recognised in the appropriate heading within tangible fixed assets in the balance sheet.