GASB Issues Standard on Service Concession Arrangements
December 29, 2010
On December 16, the Governmental Accounting Standards Board (GASB) issued Statement No. 60, “Accounting and Financial Reporting for Service Concession Arrangements.” The standard applies to public-private partnerships in which the public institution retains specific control criteria.
Since the 1980s, many public colleges and universities have entered into various types of arrangements with private business enterprises to deliver services to university students, faculty, and staff. These arrangements are typically called public-private partnerships. GASB's use of the term “service concession arrangements” (SCA) more broadly includes partnerships or arrangements between a transferor (a governmental entity such as a public institution) and an operator (either private sector or governmental) in which (1) the transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset (a "facility") and (2) the operator collects and is compensated with fees from third parties.
Common examples of SCAs cited by GASB include long-term arrangements in which a government (the “transferor”) engages a company or another government (the “operator”) to operate a major capital asset—such as toll roads, hospitals, and student housing—in return for the right to collect fees from users of the capital asset. In these SCAs, the operator generally makes a large up-front payment to the transferor. Alternatively, the operator may build a new capital asset for the transferor and operate it on the transferor’s behalf.
The statement provides guidance on whether the transferor or the operator should report the capital asset in its financial statements, when to recognize up-front payments from an operator as revenue or a deferred inflow of resources, and how to evaluate whether a current obligation or a deferred outflow of resources exists.
Although Concepts Statement No. 4 defines deferred inflows and outflows of resources, it does not address the financial reporting presentation for those elements. In November 2010, GASB issued an exposure draft (comments are due February 25, 2011) that addresses the financial statement presentation of these elements. Public institutions that may have a deferred outflow of resources or a deferred inflow of resources will need to wait for the GASB to issue financial reporting guidance for these elements before using categories other than asset or liability in the statement of financial position.
The requirements for Statement 60 are effective for financial statements for periods beginning after December 15, 2011, or FY13 for the vast majority of public institutions. The new statement will be sent to GASB literature subscribers or is available for purchase from GASB.
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