29 June 2007
The Treasury's Financial Reporting Advisory Board has urged the government to implement a strict interpretation of new international accounting rules, which could add £23bn of debt on to the government's books.
Over recent years, Frab has expressed a number of concerns about inconsistent accounting treatments of Private Finance Initiative deals.
But its June 25 annual report noted that the public sector's move to International Financial Reporting Standards from 2008/09 will mean 'material differences' in accounting for PFI deals and 'present a positive opportunity for the public sector to achieve greater consistency in accounting for PFI'.
While approximately half the debts associated with PFI deals are not registered on public sector balance sheets, a move from UK Generally Accepted Accounting Practice to IFRS should, in theory, see the outstanding £23bn moved 'on balance sheet', Frab noted.
Although the standards are drawn up with a view to application in the private sector, Frab said it 'would normally expect symmetry in the accounting treatment by the public and private sector parties to a PFI contract. That is, the asset should appear on one party's balance sheet, not on both, nor on either.
'In the board's view [current IFRS guidance on PFI accounting] gives a strong indication of what public sector accounting should be,' Frab continued.
PFjun2007
