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Chapter BLM20150

Document Cited in Related
Vincent
Published date10 April 2016
Record NumberBLM20150

UK GAAP (FRS 5, Application Note F)

Application Note F of FRS 5 applies to Private Finance Initiative (PFI) and similar contracts. Features of a PFI contract include:

  • A contract to provide services is awarded by the purchaser (a public sector entity) to the operator (a private sector entity). The contract will specify the level of service required over the period of the contract. Usually, the contract also provides for a single (‘unitary’) payment to be made in each period, linked to factors such as availability, performance and levels of usage.
  • A property, which is legally owned by or leased to the operator, will usually have to be provided to perform the contracted services. Such properties include buildings (e.g. a prison or hospital), roads, railways, bridges, vehicles, and computer systems. Under the PFI contract, the operator will typically design, build, finance and operate the property. The contract may specify features or standards required of the property, for example, in order to satisfy statutory obligations of the purchaser. The property may or may not have potential for third-party use during the term of the PFI contract.

Application Note F also applies to contracts of a similar nature to PFI contracts but which are between entities in the private sector, for...

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