Lesson 77 - Advanced Accounting Course

Lesson 77: Public-Private Partnerships (PPP): Accounting Considerations

🤝 What Are Public-Private Partnerships (PPPs)?

A Public-Private Partnership (PPP) is a collaboration between a government and a private company to deliver a public service or infrastructure project, like:

• 🏥 Hospitals
  
  

• 🏫 Schools
  
  

• 🚧 Highways
  
  

• 💧 Water treatment plants
  
  

🧠 In simple terms: The government provides the service, but the private sector builds or operates it — often using private funds.

💼 Why Use PPPs?

🧾 Common PPP Models 

📊 Accounting Considerations in PPPs

Governments must consider who controls the asset and who bears the risks and rewards. Accounting standards like IPSAS, GASB, or IFRS provide guidance.

🧮 Key Accounting Issues

📘 Example under IPSAS 32 (Service Concession Arrangements) 

💡 Sample Journal Entry (For Public Sector)

When recognizing an asset under a PPP:

bash

CopiaModifica

Dr. Infrastructure Asset         $10,000,000  

   Cr. Service Concession Obligation   $10,000,000

When making payments to private partner:

bash

CopiaModifica

Dr. Service Concession Obligation   $500,000  

Dr. Interest Expense                $100,000  

   Cr. Cash                         $600,000

📉 Risks and Pitfalls

✅ Summary

• PPPs help governments leverage private sector expertise and funding
  
  

• Accounting must reflect control, ownership, and financial obligations
  
  

• Follow standards like IPSAS 32, GASB 94, or IFRIC 12 to treat PPPs correctly
  
  

• Proper risk assessment, reporting, and transparency are essential