PPPs where the only remaining element is for the property, (i.e. the financing part of the infrastructure), which are treated akin to a lease and accounted for in accordance with the lease standard Para F7(a); or PPPs where the remaining element of the service payment still incorporates some services (maintenance/operating), in which case they are accounted for directly within FRS 5 (Para F7 (b)). To re-iterate, where a PPP contains service payments which can be fully disaggregated into their financing component, such arrangements are required to be accounted for as leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership (AASB 117.8). The indicators of a finance lease include the following: the lease transfers ownership of the asset to the lessee by the end of the lease term; the lease term is for the major part of the economic life of the asset; at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and The leased assets are of such a specialised mature that only the lessee can use them without major modifications. Indicative criteria for a finance lease are in AASB 117 at paragraphs 10 and 11. Typically, the type of PPP project assets covered by this policy meet the finance lease definition. The leased assets and a corresponding lease liability will be recognised on the balance sheet at the commencement of the lease term i.e. at Commercial Acceptance, which is the date on which the lessee becomes entitled to use the leased assets for the provision of public services (AASB 117.20). Agencies should seek detailed accounting advice from an accounting firm initially and then as necessary, in applying this policy.
PPPs where the only remaining element is for the property, (i.e. the financing part of the infrastructure), which are treated akin to a lease and accounted for in accordance with the lease standard Para F7(a); or PPPs where the remaining element of the service payment still incorporates some services (maintenance/operating), in which case they are accounted for directly within FRS 5 (Para F7 (b)). To re-iterate, where a PPP contains service payments which can be fully disaggregated into their financing component, such arrangements are required to be accounted for as leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership (AASB 117.8). The indicators of a finance lease include the following: the lease transfers ownership of the asset to the lessee by the end of the lease term; the lease term is for the major part of the economic life of the asset; at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and The leased assets are of such a specialised mature that only the lessee can use them without major modifications. Indicative criteria for a finance lease are in AASB 117 at paragraphs 10 and 11. Typically, the type of PPP project assets covered by this policy meet the finance lease definition. The leased assets and a corresponding lease liability will be recognised on the balance sheet at the commencement of the lease term i.e. at Commercial Acceptance, which is the date on which the lessee becomes entitled to use the leased assets for the provision of public services (AASB 117.20). Agencies should seek detailed accounting advice from an accounting firm initially and then as necessary, in applying this policy.