A Privately Financed Project (PFP) is a contractual arrangement under which the Government grants a concession to the private sector to supply and operate economic or social infrastructure that would traditionally have been acquired and operated by the public sector. Examples include toll roads, railway stations, hospitals, water treatment plants, prisons, and car parks1.
Under a PFP, a public sector entity (the purchaser) arranges for a private sector entity (the operator) to provide the infrastructure and associated services for an agreed period (the concession period).
It is integral to most PFPs that the private sector operator designs, finances, builds and operates the infrastructure needed to provide the contracted service for the concession period. PFPs typically include both a capital component and a continuing service delivery component. They are generally complex and involve high capital costs, lengthy contract periods that create long-term obligations, and a sharing of risks between private and public sectors2.
PFPs can take various forms, including Build, Own, Operate (BOO); Build, Own, Operate, Transfer (BOOT); and Build, Operate, Transfer (BOT). They are sometimes called Public Private Partnerships (PPPs)3 or Service Concession Arrangements4 or referred to as Private Provision of Public Infrastructure (PPPI).
Accounting for PFPs has not been specifically dealt with in Australian accounting standards. Some PFPs fall within the scope of Accounting Standard AASB 117 Leases but many do not. In the absence of specific authoritative guidance, diverse or unacceptable practices may occur or develop in accounting for PFPs. This will undermine the relevance and reliability of general purpose financial reports.
This Policy is therefore issued to provide guidance for NSW Public Sector entities in accounting for PFPs.
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1 Working with Government, Private Financing of Infrastructure and Certain Government Services in NSW, NSW Government Green Paper, November 2000, p 9
2 Working With Government, Guidelines for Privately Financed Projects, NSW Government White Paper, November 2001, p iv
3 Working With Government, Guidelines for Privately Financed Projects, NSW Government White Paper, November 2001, p 2
4 Urgent Issues Group Interpretation 129 Disclosure - Service Concession Arrangements