F51 Where it is concluded that the purchaser has an asset of the property and a liability to pay for it, these should be recorded in its balance sheet. The initial amount recorded for each should be the fair value of the property.+ Subsequently, the asset should be depreciated over its useful economic life and the liability should be reduced as payments for the property are made. In addition, an imputed finance charge on the liability should be recorded in subsequent years using a property-specific rate (paragraph F16 discusses how to determine such a rate). The remainder of the PFI payments (ie the full payments, less the capital repayment and the imputed financing charge) should be recorded as an operating cost. If the purchaser has any other obligations in relation to the PFI contract, these should be accounted for in accordance with FRS 12 'Provisions, Contingent Liabilities and Contingent Assets'.*
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+ For a lease the sum to be recorded both as an asset and as a liability in the present value of the minimum lease payments, derived by discounting them at the interest rate implicit in the lease.
* FRS 12 will be issued in September 1998 and it will be effective for accounting periods ending on or after 23 March 1999.
F52 Generally, the purchaser should recognise each property when it comes into use. An exception is where the purchaser bears significant construction risk, in which case it should recognise the property as it is constructed.