8.73 The estimated fair value on reversion of the residual interest is based on the AV's professional estimate at the start of the concession period. Bodies' asset bases are reviewed and revalued by the AV on a five-yearly cycle. As a result of revaluation, it is possible that the value of the residual interest may increase, in which case:
• The NPV of the increase in value should be added to Tangible Fixed Assets over the period remaining until reversion;
• There should be corresponding addition to the revaluation reserve.
8.74 In line with the principles of resource accounting residual interests should be revalued at each balance sheet date either by indexation or by full revaluation required every five years.
8.75 If, during the life of the contract, conditions change so that the expected value of the residual falls (but there are no changes to payments scheduled under the contract), then consideration should be given to whether there has been an impairment. Under FRS12 - Provisions, Contingent Liabilities and Contingent Assets the PPP Scheme could potentially be classed as an "onerous" contract, in other words one where the unavoidable costs of meeting the obligations under it exceed the economic benefits expected to be received from it. Accordingly, the NPV of the impairment should be provided for in full in the accounting period in which it arises.
8.76 The accounting treatment for the impairment should be in accordance with that specified for impairments to fixed assets in the capital accounting manual.
8.77 The financial impacts of impairments that result in additional expenditure which should be treated in accordance with the Capital Accounting Manual.