In March, the GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangement (P3s).

A P3 is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying P3 asset), for a period of time in an exchange or exchange-like transaction. Some P3s are service concession arrangements (SCA), in which the operator collects and is compensated by fees from third parties; the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services, and the transferor is entitled to significant residual interest in the service utility of the underlying P3 asset at the end of the arrangement.

Some P3s may meet the definition of a lease, in which Statement No. 87 should be followed, if the existing assets of the transferor that are not required to be improved by the operator as part of the P3 arrangement are the only underlying P3 assets and the P3 does not meet the definition of a SCA.

The P3 term is defined as the period during which the operator has a noncancellable right to use an underlying P3 asset, plus, if applicable, certain periods if it is reasonably certain, based on all relevant factors, that the transferor or the operator either will exercise an option to extend the P3 or will not exercise an option to terminate the P3.

The accounting for a P3 is generally that the transferor should recognize an underlying P3 asset as an asset in financial statements using full accrual method. There are instances where a receivable should be recorded rather than an underlying P3 asset. Revenue should be recognized by a transferor in a systematic and rational manner over the P3 term. Governmental fund revenue is recognized in a systematic and rational method over the life of the receivable when a receivable is recorded. If the government is the operator of the P3, the full accrual method requires an intangible right to use asset be recorded. Certain limitations do apply.

The requirements of Statement No. 94 are effective for fiscal years beginning after June 15, 2022 and all reporting periods thereafter. Early application is encouraged. P3s should be recognized and measured using the facts that exist at the beginning of the period of implementation. Statement No. 95 did not extend this implementation date.

The full text of Statement No. 94 is available here.

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