PPPs are generally understood to be arrangements whereby elements of the acquisition and operating of infrastructural projects that were traditionally undertaken by the public sector are transferred to the private sector. These elements may include legal ownership of the infrastructure for an agreed number of years, the financing of the asset, and production of services related to the exploitation of the asset. PPP arrangements vary widely in character and typically involve large financial resources. They are popular in several countries for financing and operating (rail) roads, education and health facilities, and even prisons. From the point of view of the public sector, the main attraction of this limited privatization is the efficiency gains they promise. However, by using the private sector to finance these projects governments may avoid showing explicit government debt. Furthermore, PPPs bear considerable fiscal risks to government (e.g., in the shape of guarantees, etc.) and the accounting of such risks may affect policy decisions.  It is therefore imperative that statistics appropriately reflect these hazards; the present 1993 SNA does not provide sufficient guidance in this respect.

Several issues need to be resolved. A main question is who should be considered the economic owner of the fixed asset: government, the private enterprise, or maybe both to some extent. A related question is whose balance sheet should show the external financing of the project. Further questions concern the classification and valuation of the transactions taking place between government and the private enterprise during the period covered by the operation of the asset.

PPPs were proposed as a 1993 SNA update issue (issue number 24) by the Canberra II Group on the Measurement of Non-Financial Assets. The Group discussed the issue of economic ownership on the basis of the criteria economic control and who has the risks and rewards of the assets. As the relative importance of these factors are likely to vary with each PPP, it appeared to be very difficult to formulate generally applicable rules. The Group came to a similar conclusion regarding the operation of the assets. Headway had been made in Eurostat’s ESA 95 Manual of government deficit and debt,¹ the UK Accounting Standards Board and the International Accounting Standards Board (IASB), but none of the proposals found a strong backing in the Canberra II Group.

The AEG discussed an Issues paper on PPPs during its January/February 2006 meeting.² The AEG acknowledged that a general description would be very useful but that the issues are very complex. It was therefore suggested that the material might appear as an annex to the updated SNA. Representatives of the Australian Bureau of Statistics, the Office for National Statistics, and the International Monetary Fund offered to draft a text for the annex.

Statisticians should consider the rules that the IASB and the International Public Sector Accountants Standards Board (IPSASB³) adopt regarding PPPs⁴, even if these are not decisive for the statistical treatment. By end-2006, the IASB arrived at a conclusion on how the private sector should account for PPPs.⁵ The IPSASB has started its own project for public sector financial reporting on PPPs, but an end date is not yet known.  

In view of the limited progress made up till date, the ISWGNA decided it would be better to add this topic to the Research Agenda.  
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¹ Section IV.4.2, Long term contracts between government units and non-government partners.
² The document was prepared by Brett Kaufmann, Robin Lynch, Christoph Maier, and John Pitzer.
³ The IPSASB is part of the International Federation of Accountants (IFAC).
⁴ PPPs are often referred to as “service concessions arrangements” in public and business accounting.
⁵ The International Financial Reporting Interpretations Committee (IFRIC, the interpretative arm of the IASB), issued a near-final interpretation-IFRIC 12, Service Concessions Arrangements, on November 30, 2006. It concluded that the asset should be recorded with the unit that has the controls over it, which usually is government. The private operator receives either a financial asset in the shape of a right on cash payments from government for services rendered, or an intangible asset in the shape of the right to charge users of the public asset.

AEG document and conclusion:  
http://unstats.un.org/unsd/sna1993/description.asp?ID=23
Overview IFRIC 12:
http://www.iasb.org/Current+Projects/....htm