Reporting PFI in Annual Accounts: A User's Perspective

Ron Hodges · Howard J. Mellett

34 citations0/0 files storedPublic Money & Management

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Accounting Theory and Financial Reporting Accounting and Financial Management Public-Private Partnership Projects

Abstract

Deciding how to account for public sector financing provided under Private Finance Initiative (PFI) contracts has engendered considerable debate which revolves around whether they should be 'on balance sheet' or 'off balance sheet'. The Accounting Standards Board (ASB) provides the underpinning in FRS 5, interpreted through an ASB Application Note 'Private Finance Initiative and Similar Contracts' and the Treasury Technical Note 'How to Account for PFI Transactions'. This article illustrates the impact of the alternative accountings. It provides an analysis of the annual accounts of two NHS trusts whose assets are financed through PFI contracts, but which use different accounting approaches. There are considerable difficulties for the user of the accounts when attempting to interpret the comparative financial results of the two trusts in the light of these reporting differences and the financing of public services is less than adequately reflected in these resource accounting based financial statements.

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References

1999The Private Finance Initiative: Clarification of a Future Research Agenda 1992THE DEVELOPMENT OF CONCEPTUAL FRAMEWORKS OF ACCOUNTING FOR THE PUBLIC SECTOR 2003Reporting public sector financial results 2002Investigating standard setting: accounting for the United Kingdom's private finance initiative

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