GASB Issues Exposure Draft on Public-Private and Public-Public Partnership Arrangements

June 25, 2019

Earlier this month, the Governmental Accounting Standards Board (“GASB”) released an exposure draft for public-private and public-public partnership arrangements (“PPPs”) and availability payment arrangements (“APAs”) concerning guidance outside of the scope of the GASB’s leases (GASB Statement No. 87) and service concession arrangements (“SCA”) standards. According to the Exposure Draft, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, the proposed Statement would clarify certain guidance under GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, and offer new accounting and financial reporting guidance for APAs.

Under the proposal, a PPP would be an arrangement wherein a government is under contract with an operator to deliver public services by conveying control of right to operate or use an infrastructure or other non-financial asset for an extended time in an exchange or exchange-like transaction. The proposal also defines SCA as an arrangement between a transferor and an operator wherein all of the following criteria are met:

  • The transferor conveys to the operator the right and related obligation to provide public services through the use and operation of an underlying PPP asset in exchange for significant consideration, such as an up-front payment, installment payments, a new facility, or improvements to an existing facility.
  • The operator collects and is compensated by fees from third parties.
  • The transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services.
  • The transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement.

While the proposed Statement preserves the financial reporting requirements for SCAs under Statement No. 60, governments would have to apply the requirements under Statement No. 87 for PPPs that fall under the lease definition but not the SCA definition. If a PPP that is neither an SCA nor a lease, a transferor would have to recognize an asset for the underlying PPP asset and a deferred inflow of resources for consideration received or to be received as the PPP. Another proposed change would require a governmental operator to disclose an intangible right-to-use asset associated with the underlying PPP asset that either is owned by the transferor or is the underlying asset of an SCA.

Regarding APAs under the proposal, such transactions would be accounted for as either a financed purchase of an asset or an outflow of resources in the period or periods to which APA payments relate based on the provisions of the arrangement.

Comments on the Exposure Draft are due Friday, September 13. If approved, the proposed Statement would supersede Statement No. 60 and become effective for fiscal years starting after June 15, 2021. Early application would be permitted.