GASB 94: P3s and APAs is Effective – Don’t Miss It!

by Corey Arvizu, CPA, Partner

Posted on August 30, 2023

GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements may have not been on your radar, but this standard is effective for the fiscal year ending June 30, 2023, and all reporting periods thereafter. The standard is part of GASBs pronouncement suite which addresses common accounting and financial reporting issues involving the right to use another entity’s nonfinancial assets such as capital assets, infrastructure, information technology software, and other tangible assets. The other two standards part of the suite are Leases and Subscription-Based Information Technology Arrangements.

What is a P3? A P3 is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying P3 asset), for a period of time in an exchange or exchange-like transaction. Or in other words, an arrangement in which an operator pays a government for the right to provide a public service. The payment to the government can be made in cash; however, it commonly involves the construction of a new capital asset that the operator purchases or builds. Improvements to an existing capital asset also qualify as a form of payment. The operator then collects fees from third parties for providing the service, such as fees charged to drivers for use of a toll road. The operator may also be another government. It should be noted that a service concession arrangement (SCA) as defined in GASB Statement No. 60 is type of a P3.

How does an APA differ from a P3? An APA involves the operator providing services that may include designing, constructing, financing, maintaining or operating a capital asset. However instead of being compensated by the fees paid by third parties, the government pays the operator based solely on the asset’s availability to provide the service. The government is also responsible for fee collection and retains the risk that demand for the service may not meet expectations.

Accounting for P3s is similar to the approach used to account for leases under GASB Statement 87. Accounting for APAs is dependent upon what the operator is required to perform. An APA may include finance purchase accounting by the government, with other activities accounted for as an expense as would be done for an ordinary service contract.

The above provides some key considerations for GASB Statement No. 94. The standard provides additional guidance that should be considered for both transferors and operators. Similar to leases, the first step includes evaluating contracts and transactions that may qualify as a P3 or APA in order to compile a population of contracts that may require further consideration. If you have any questions regarding this standard or would like assistance with implementation issues, please contact us.