New PPP Guidance Coming Spring 2020
Public-Private Partnerships and Availability Payment Arrangements
In March 2020, the GASB is expected to approve a final Statement on accounting and financial reporting for public-private and public-public partnerships (PPPs) and availability payment arrangements (APAs). PPPs and APAs comprise a wide variety of arrangements between a government and another party (sometimes another government) that is engaged to provide public services to a government’s constituents.
The types of assets subject to PPPs have included roads, bridges, airport terminals, public transit, hospitals, student services at colleges and universities, sports facilities, jails, water treatment, and museums. Virtually any public capital asset or service, however, could be the subject of a PPP.
APAs are a particular type of arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying infrastructure or other nonfinancial asset. APAs have become more common among governmental entities in recent years.
The new final Statement will improve financial reporting by establishing definitions of PPPs and APAs for financial reporting purposes and providing uniform guidance on accounting and financial reporting for transactions meeting those definitions.
The Board issued an Exposure Draft in June 2019 and received more than 30 comment letters from stakeholders. The Board is now concluding redeliberations on that feedback as it works toward completion of the new guidance.
The new final Statement will improve financial reporting by establishing definitions of PPPs and APAs for financial reporting purposes and providing uniform guidance on accounting and financial reporting for transactions meeting those definitions. The guidance is expected to yield more relevant and reliable information for financial statement users and create greater consistency in practice.
The final Statement will supersede Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements (SCAs) and provide guidance for those transactions within its scope. The Statement also will cover other types of PPPs not originally within the scope of Statement 60 or subject to the provisions of Statement No. 87, Leases, and APAs.
GASB research found an increase in interest in PPPs. Research also found particular interest around the use of APAs as alternative payment mechanisms to PPPs. Although the research results lead to the conclusion that Statement 60 generally was effective in providing useful information about SCAs, certain application issues have come up in the time since its issuance that would benefit from clarification.