Paragraph 21 of Accounting Standard AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides, inter alia, that in the absence of an Australian Accounting Standard that specifically applies to a transaction, other event or condition, an entity may, in certain circumstances, apply an accounting policy from the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards.
The United Kingdom Accounting Standards Board (ASB) has issued an authoritative pronouncement that deals with the accounting for PFPs.
The ASB's Financial Reporting Standard 5 Reporting the Substance of Transactions (FRS 5) requires a reporting entity's financial statements to report the substance of the transactions into which it has entered rather than merely their legal form. FRS 5 includes Application Notes that specify how the requirements of the standard are to be applied to transactions that have certain features.
Application Note F Private Finance Initiative and Similar Contracts, issued in September 1998, deals specifically with accounting for transactions resulting from the United Kingdom Government's Private Finance Initiative (PFI) and other contracts of a similar nature. As PFPs are similar in nature to the contracts resulting from the Private Finance Initiative, Application Note F can be applied.
This Policy mandates the use of Application Note F Private Finance Initiative and Similar Contracts contained in the United Kingdom Accounting Standards Board's Financial Reporting Standard 5 Reporting the Substance of Transaction, by NSW public sector entities when accounting for Privately Financed Projects (PFPs).
Application Note F is set out in Appendix 1 and discussed below.
The terminology in Application Note F will need to be modified where necessary to enable it to apply in Australia. References to the Private Finance Initiative (PFI) should be read as references to PFPs; references to property should be read as references to infrastructure, references to SSAP 21 Accounting for leases and hire purchase contracts should be read as references to Accounting Standard AASB 117 Leases; and general references to FRS 5 Reporting the Substance of Transactions should be read as general references to current Australian accounting standards.
Application Note F and Financial Reporting Standard FRS 5 are also available at www.frc.org.uk/asb/technical/standards/pub0100.html. Application Note F is the only part of FRS 5 that is relevant to this Policy