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Reporting PFI in Annual Accounts: A User's Perspective

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  • Ron Hodges
  • Howard Mellett

Abstract

Deciding how to account for public sector financing provided under Private Finance Initiative (PFI) contracts has engendered considerable debate which revolves around whether they should be 'on balance sheet' or 'off balance sheet'. The Accounting Standards Board (ASB) provides the underpinning in FRS 5, interpreted through an ASB Application Note 'Private Finance Initiative and Similar Contracts' and the Treasury Technical Note 'How to Account for PFI Transactions'. This article illustrates the impact of the alternative accountings. It provides an analysis of the annual accounts of two NHS trusts whose assets are financed through PFI contracts, but which use different accounting approaches. There are considerable difficulties for the user of the accounts when attempting to interpret the comparative financial results of the two trusts in the light of these reporting differences and the financing of public services is less than adequately reflected in these resource accounting based financial statements.

Suggested Citation

  • Ron Hodges & Howard Mellett, 2004. "Reporting PFI in Annual Accounts: A User's Perspective," Public Money & Management, Taylor & Francis Journals, vol. 24(3), pages 153-158, June.
    • Handle: RePEc:taf:pubmmg:v:24:y:2004:i:3:p:153-158
    DOI: 10.1111/j.1467-9302.2004.00412.x
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    Citations

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    Cited by:

    1. Mark A. Clatworthy & Howard J. Mellett & Michael J. Peel, 2008. "Changes in NHS Trust Audit and Non-Audit Fees," Public Money & Management, Taylor & Francis Journals, vol. 28(4), pages 199-205, August.
    2. Antonio Barretta & Cristiano Busco & Pasquale Ruggiero, 2008. "Trust in Project Financing: An Italian Health Care Example," Public Money & Management, Taylor & Francis Journals, vol. 28(3), pages 179-184, June.
    3. Kuno Schedler, 2006. "Introduction," Public Money & Management, Taylor & Francis Journals, vol. 26(4), pages 203-204, September.
    4. Hodges, Ron & Mellett, Howard, 2012. "The U.K. private finance initiative: An accounting retrospective," The British Accounting Review, Elsevier, vol. 44(4), pages 235-247.

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