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IFAC's International Public Sector Accounting Standards Board Consults on Accounting for Service Concession Arrangements

Apr 4, 2008 | New York | English

The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board of the International Federation of Accountants (IFAC), is seeking comments on a consultation paper entitled Accounting and Financial Reporting for Service Concession Arrangements.

The consultation paper identifies issues and provides proposals to be considered in the development of IPSASB requirements for accounting and financial reporting of service concession arrangements. Obtaining feedback from constituents is a key desired outcome of the paper. The consultation paper provides an overview of the various types of arrangements that are considered public-private partnerships, of which service concession arrangements are a subset. Also included is an analysis of existing authoritative guidance to assess whether it is sufficient to address the accounting and reporting implications for these arrangements. The paper concludes that additional guidance is needed for service concession arrangements in the public sector. 

Service concession arrangements are distinct from other public-private partnership arrangements in that the risks and benefits associated with constructing, owning and operating the underlying property, along with the control over the property, are shared to a greater degree by the public sector entity and private sector entity involved in the arrangement. The sharing of these aspects of the property, as well as the general complexity of these transactions, has often made the financial reporting of the property for the parties unclear.

This lack of specific guidance for service concession arrangements has caused divergence in how the property is reported, even occasionally resulting in the property not being reported as an asset by either the public sector or private sector entity. This has also provided public sector entities the opportunity to use these arrangements as a means to fulfill their infrastructure needs without recognizing the property and related financing in their financial statements, while potentially still meeting fiscal targets.

In November 2006, the International Accounting Standards Board's International Financial Reporting Interpretations Committee (IFRIC) issued IFRIC 12, Service Concession Arrangements, which is applicable only to the operators of these arrangements and not to the public sector grantor. This left many public sector grantors without international guidance on reporting on service concession arrangements. This consultation paper is the IPSASB's first step in considering options for developing guidance for them.

"The use of public-private partnership arrangements, which include service concession arrangements, by the public sector, as vehicles to build and improve infrastructure and other public facilities and provide the services associated with these structures, has continued to grow worldwide over recent years," states IPSASB Chair Mike Hathorn. "The lack of international guidance for grantors of service concession arrangements, combined with the growing public sector interest in these arrangements, made the need for IPSASB action on this issue critical."

How to Comment
Comments on the consultation paper are requested by August 1, 2008, and it may be viewed by going to Comments may be submitted by email to They can also be faxed to the attention of the IPSASB Technical Director at +1 (416) 977-8585, or mailed to the IPSASB Technical Director at 277 Wellington Street West, 6th Floor, Toronto, Ontario M5V 3H2, Canada. All comments will be considered a matter of public record and will ultimately be posted on the IFAC website.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high quality performance by professional accountants in business.