8. The classification under IFRIC 12 focuses on which party controls the PFI asset. If the MOD is deemed to control both the services provided by the asset and the residual interest in the asset at the end of the contract, the PFI is to be classified as On-Balance Sheet. However if no such control is established, IFRIC 4-Determining Whether an Arrangement Contains a Lease and IAS 17-Leases are to be used to both determine the existence of a lease within the PFI and, if so, whether it is a finance or operating lease.
9. The classification under ESA 95 focuses on which party to the PFI contract holds construction risk, demand risk and availability risk. If the MOD carries construction risk, the assets are viewed as being on the MOD Balance Sheet. Where the Operator holds construction risk and one of demand or availability risk, the assets are not considered to be on MOD's Balance Sheet. More detailed guidance on the application of ESA95, including a full explanation of how risk should be assessed is included in the attached Technical Guidance on the Application of the Standards used in the production of National Accounts to PFI and Similar Transactions issued by HM Treasury in September 2009 at Annex A.