CARS now supports accounting for assets under PFI and/or LIFT as per the DoH’s “Accounting for PFI under IFRS” guidance (v2 issued June 2009). At this stage the accounting for the liability is undertaken on the Universal Model spreadsheet provided by the DoH—but we would like to speak to users who would like to discuss how this functionality could be provided in CARS.
To have a PFI funded asset shown on the Balance Sheet the following action is required:-
- The asset should be recognised when it becomes operational and it’s initial value set to equal the fair value of the asset.
- A decision must be made as whether the asset requires separate components which have a significant cost and significantly different life from the rest of the asset. If components are required they are entered in CARS as separate assets of the appropriate type but may be grouped together.
- The assets should be given an Acquisition Method of ‘PFI’ and also flagged as leased with a Lease Type of ‘PFI’
- The assets life should be the estimated useful economic life (not the term of the contract!)
- Following initial measurement, the asset is treated as any other item of property. Its fair value will need to be kept up to date by using either Revaluations and/or Indexation, and the asset will be depreciated over it’s remaining useful economic life.
A LIFT scheme works in a very similar way with the following differences:-
- If it is a Leaseplus asset it should be recognised at the lower of the fair value of the asset or the present value of the minimum lease payments.
- The assets should be given an Acquisition Method of ‘LIFT’ and also flagged as leased with a Lease Type of ‘LIFT’
CARS also supports PFI and LIFT assets which are not deemed to be shown on the Balance Sheet. With these assets the residual interest is usually built up over the life of the contract. In these cases the assets should be given an Acquisition Method of ‘PFI’ or ‘LIFT’ but not flagged as leased .