§ Matthew TaylorTo ask the Chancellor of the Exchequer, pursuant to his answer of 20 November 2001,Official Report, column 270W, on capital assets, what guidelines the (a) National Audit Office and (b) Treasury issue on how to classify who bears the risks and rewards associated with an asset. [19189]
§ Mr. Andrew SmithGenerally accepted accounting practices are used to determine who bears the risks and rewards associated with an asset, and hence its accounting treatment. These are applied by accountants working for departments, and subsequently audited by the National Audit Office (NAO). The Office for National Statistics (ONS) follows the same treatment for national accounts.
The Treasury's "Resource Accounting Manual" makes clear that all complex transactions should be accounted for under the overriding principles of the Accounting Standards Board's (ASB) Financial Reporting Standard (FRS) 5 "Reporting the Substance of Transactions". Such transactions include those where ownership of capital assets reverts to the public sector, for leasing transactions, the more specific principles of the ASB's Statement of Standard Accounting Practice (SSAP) 21 "Accounting for Leases and Hire Contract Contracts". For Private Finance Initiative transactions, more specific guidance is given in the Treasury document "Technical Note no. 1 (revised)—How to Account for PFI Transactions", which sets out additional practical guidance on how to apply the ASB's Application Note "Amendment to FRS5—Private Finance Initiative and Similar Contracts".
The aspect of the question relating to National Audit Office guidelines has been referred to the Chairman of the Public Accounts Commission who can respond on behalf of the NAO.