Appendix A.2 - Accounting Treatment of Government of ...
The accounting treatment for P3 projects will be in accordance with the accounting policies and reporting practices of the Government of Alberta (GOA), which follow the recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants. There is no specific guidance on accounting for P3s so the guidance in PS 3250, Tangible Capital Assets, and PSG-2, Leased Tangible Capital Assets, is specifically referred to in establishing the appropriate accounting treatment.1Value of Asset Acquired and Liability IncurredThe accounting treatment is based on the business structure of a specific project, so it may vary between projects. For the ring road and schools projects to date, the GOA acquired assets, (roads and bridges) or had assets constructed for a Supported Infrastructure Organization (SIO) to be owned by the SIO (for example, school boards). Accordingly the GOA recognizes assets (roads and bridges) or capital expenses (schools) and the corresponding liabilities. The assets or capital expenses were recognized as construction progressed. This is because the ownership of the land and all improvements belong to the public entity, and GOA has an obligation to compensate the proponent for work performed to date (see project contracts for details). By the time construction is complete, the assets or capital expenses and the corresponding liabilities are fully recognized. The value of the assets or capital expenses is determined by the provisions of PSG-2 plus the book value of any provincial capital contributions. PSG-2 states that “the value of the leased tangible capital asset and the amount of the lease liability, recorded at the beginning of the lease term, would be the present value of the minimum lease payments.”2PROCUREMENT COSTSProcurement costs for GOA assets may also be capitalized in accordance with GOA’s accounting policy. 3PROVINCIAL CAPITAL CONTRIBUTIONSFor projects to date, GOA has paid some of the capital construction costs to reduce the amount of private financing required for the project. These provincial capital contributions are part of the cost of the capital asset or capital expense. Appendix A.2Accounting Treatment of Government of Alberta P3s 4PAYMENTSAs part of the financial bid process, the GOA receives a breakdown on the types of payments required by the bidders at the time the financial bid is made.Capital PaymentsWhen the project is complete and monthly capital payments are made to the proponent, a portion of the payment reduces the liability, and the interest portion is a debt servicing cost. Operations and Maintenance and Major RehabilitationOperations and maintenance payments are paid and expensed when service is rendered. Major rehabilitation is either capitalized or expensed, depending on the nature of the work performed, in the period in which the work is performed. The obligation for these payments is disclosed in the notes to the financial statements.5AMORTIZATIONAssets owned by GOA are amortized in accordance with the ministry’s amortization policy for capital assets of that nature. ................
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