National Accounting Standard (hereinafter: CRS) No 10[1] „Public-private partnership agreements and contracts for works or services’ is the definition of accounting agreements[2] valuation and accounting accounting rules and presentation and disclosures in financial statements of assets and liabilities, revenue and costs resulting from public-private partnership agreements within the meaning of Article 7(1) Act dated 19 December 2008 on public-private partnerships and contracts of works or services concessions within the meaning of Article 3 and Article 4 Act dated 21 October 2016 a contract of concession for works or services.
Classification of the above contracts has been concluded In Annex 1 to CRS No 10. In addition, according to point 1.2., CRS No 10 may also be applied to liabilities and assets and costs and revenues arising from other contracts, ‘which are the subject of joint, multi-annual cooperation between the public and private parties, consisting of:
- the construction of a new or improved existing permanent measure to be used for the provision of services to persons designated by the public,
- the transfer of the right to use an existing permanent measure belonging to a public website to a private party in order to provide services to persons designated by the public website by it."
Chapter VI of CRS No 10 sets out the rules for inclusion in the accounts of partnership agreements and concession agreements. For the correct valuation of the assets and liabilities and of the revenues and costs of the contract in particular reporting periods, the information contained in the current cost budget for the contract and the accounting evidence showing the actual revenue and costs are necessary.
The basic principles for accounting for events arising from the performance of a given contract in respect of which the public party has long-term liabilities or accruals of income shall be determined by the tables presented In Annex 3 CRS No 10. The rules in the tables in question should also apply when a public party demonstrates both long-term liabilities and accruals.
Table No 1 sets out the rules applicable to the accounting records of a contract with the public when a long-term commitment arises (ancillary accounts are held by contract where necessary).[3]
- P.
Description of operations
WN Account
MA Account
PREPARATION AND PROJECT
Recognition of accounting evidence relating in particular to:
- (a) defining the subject matter of the partnership and preparing preliminary documentation,
- (b) the services of advisers, experts, analysts,
- (c) drawing up a feasibility study of the partnership and other economic and financial pre-realisation analyses,
- (d) preparing the land for transfer in kind of own contribution,
(e) obtaining permits, decisions, opinions enabling partnership
Purchase clearance
Settlements for supplies and services
Transfer of accounting evidence showing an increase in the total cost of building assets for the provision of services under the partnership
Fixed assets under construction
Purchase clearance
Payment for supplies and services
Settlements for supplies and services
Current account
IMPLEMENTATION STAGE
Transfer of own contribution to a private party
Fixed assets under construction (when cash was transferred before the construction or improvement of the fixed asset)
Current account
Transfer to a private party of a physical own contribution, e.g. building, land, equipment, equipment, machinery or specialised equipment under a lease, lease, lending or use contract
Assets intended to provide services in partnership
Fixed assets
Recognition in assets of a built or upgraded fixed asset:
(a) reallocation of fixed assets under construction,
(b) re-booking the value of a fixed asset of a long-term liability vis-à-vis a private party
Parallel capture of a permanent measure put into service to a private partner – off-balance sheet records
Assets intended to provide services in partnership
Private website assets
(a) Fixed assets under construction
(b) Private settlement
OPERATIONAL STAGE
Taking the remuneration of the private party, on the basis of accounting evidence, by:
(a) repayment of the commitment
(b) financing costs (interest)
(c) operating costs of the fixed asset
(a) Settlements with a private party
(b) Correction of the obligation to the private party
(c) General costs (foreign services)
Settlements for supplies and services
Transfer of cash payment (wages) to the current account of the private party
Settlements for supplies and services
Current account
Decommitment of public-private partnership assets
General costs (Amortisation)
Decommitment of assets for the provision of services under the partnership
Balance sheet valuation of long-term liabilities at the adjusted purchase price
Financial costs
Correction of the obligation to the private party
CLEARANCE OF THE AGREEMENT
take-up of a permanent measure
Fixed assets
Assets for the provision of partnership services [gross value and redemption]
De-booking of a fixed asset transferred to a private party at the end of the duration of the contract and its recovery — off-balance sheet records
Private website assets
Table No 2 sets out the rules applicable to the accounting records of the contract with the public when the accruals of income arise (ancillary accounts are kept as required by the individual contracts).[4]
- P.
Description of operations
WN Account
MA Account
PREPARATION AND PROJECT
Recognition of accounting evidence relating in particular to:
- (a) defining the subject matter of the partnership and preparing preliminary documentation,
- (b) the services of advisers, experts, analysts,
- (c) drawing up a feasibility study of the partnership and other economic and financial pre-realisation analyses,
- (d) preparing the land for transfer in kind of own contribution,
(e) obtaining permits, decisions, opinions enabling partnership
Purchase clearance
Settlements for supplies and services
Transfer of accounting evidence showing an increase in the total cost of building assets for the provision of services under the partnership
Fixed assets under construction
Purchase clearance
Payment for supplies and services
Settlements for supplies and services
Current account
IMPLEMENTATION STAGE
Transfer of own contribution to a private party
Fixed assets under construction (when cash was transferred before the construction or improvement of the fixed asset)
Current account
Transfer to a private party of a physical own contribution, e.g. building, land, equipment, equipment, machinery or specialised equipment under a lease, lease, lending or use contract
Assets intended to provide services in partnership
Fixed assets
Recognition in assets of a built or improved fixed asset
Fixed assets under construction
Accruals of income
Reclassification of a built-up or improved permanent measure to assets intended to provide services under the partnership
Parallel capture of a permanent measure put into service by a private party – off-balance sheet records
Assets intended to provide services in partnership
Private website assets
Fixed assets under construction
OPERATIONAL STAGE
Depreciation of assets intended to provide services under the partnership
Specific costs
(Depreciation)
Decommitment of assets for the provision of services under the partnership
Reference of the accrual instalments of revenues to revenues of the current period (parallel to depreciation deductions)
Accruals of income
Other operating revenue
CLEARANCE OF THE AGREEMENT
take-up of a permanent measure
Fixed assets
Assets for the provision of partnership services [gross value and redemption]
De-booking of a fixed asset transferred to a private party at the end of the duration of the contract and its recovery — off-balance sheet records
Private website assets
The basic rules for the inclusion in the accounts of a private party of events resulting from the performance of a given contract are laid down in the tables presented In Annex 4 to CRS No 10. Depending on the remuneration system, the private party shall include in its accounts financial or intangible assets, or both financial and intangible assets. The rules in the tables should also apply when a private party displays both financial and intangible assets.
Table No 3 provide the rules applicable to the accounting records of a contract with a private party when financial assets are created (to accounts, if necessary, ancillary accounts according to individual contracts).[5]
- P.
Description of operations
WN Account
MA Account
PREPARATION AND PROJECT
Taking account of accounting evidence relating to, inter alia:
(a) preparation of the tender,
(b) participation in the tender.
Costs of the current period (Interest expenses, Construction costs)
Settlements for supplies and services
Payment for supplies and services
Settlements for supplies and services
Current account
IMPLEMENTATION STAGE
Recognition of accounting evidence relating to the construction or improvement of a permanent measure
Costs of the current period (Interest expenses, Construction costs)
Settlements for supplies and services
Receipt of a monetary own contribution from the public
Current account
Accruals of income
(if the financial contribution is made before the financial asset is recognised) - If a financial own contribution has been made after the asset intended to provide services under the partnership has been put into service, it shall adjust the value of financial assets.
Receipt of a physical own contribution provided free of charge by the public on the basis of a loan agreement — off-balance sheet records
Assets received from the public
Recognition of a financial asset taking into account the degree of advanced construction or improvement
Settlements with the public
(Financial asset included in the group other financial assets)
Revenue from the sale of products (construction services)
Recognition of a fixed asset used free of charge for the provision of services in partnership – off-balance sheet records
Public-private partnership assets
OPERATIONAL STAGE
Settlement of the monetary own contribution received from the public
Accruals of income
Other financial assets
Recognition of accounting evidence related to:
(a) the provision of services under contract, (b) with the maintenance of a permanent measure in a non-degradable state
Costs of the current period (kind costs, costs of service activities)
Settlements for supplies and services
Recognition of a financial asset taking into account the degree of advanced operational services
Settlements with the public
(Financial asset included in the group other financial assets)
Revenue from the sale of products (services)
Recognition, on the basis of accounting evidence, of the remuneration resulting from the partnership agreement, by:
(a) partial repayment of the built or improved fixed asset
(b) reimbursement of the costs of services provided in accordance with the contract
(c) reimbursement of the instalment of external financing costs
Settlements for supplies and services
Other financial assets
Rebooking the cost of producing sold construction or improvement services, as well as in-service services
Production costs of sold products (services)
Costs of service activities
Payment for supplies and services
Settlements for supplies and services
Current account
Transfer of payments (wages) by the public website
Current account
Settlements for supplies and services
Balance sheet valuation of financial assets at the adjusted purchase price
(the nature of the revenue depends on whether or not a private party is operating.
Other financial assets
Revenue from the sale of services products
or
Financial revenue
Repayment of the asset to the public at the end of the contract — off-balance sheet
Partnership assets
public-private
Repayment of fixed assets to the public received by way of own contribution in kind — off-balance sheet
Assets received from the public
Table No 4 provide rules applicable to the accounting records of a contract with a private party when intangible assets and legal assets are created (ancillary accounts are kept as required according to individual contracts).[6]
- P.
Description of operations
WN Account
MA Account
PREPARATION AND PROJECT
Taking account of accounting evidence relating to, inter alia:
(a) preparation of the tender,
(b) participation in the tender.
Costs of the current period (Interest expenses, Construction costs)
Settlements for supplies and services
Payment for supplies and services
Settlements for supplies and services
Current account
IMPLEMENTATION STAGE
Recognition of accounting evidence relating to the construction or improvement of a permanent measure
Costs of the current period (Interest expenses, Construction costs)
Settlements for supplies and services
Receipt of a monetary own contribution by a public party
Current account
Accruals of income
(if the financial own contribution was obtained before the recognition of intangible assets) - If a financial own contribution has been made after the asset intended to provide services under the partnership has been put into service, it shall adjust the initial value of the intangible and legal value.
Receipt of a physical own contribution provided free of charge by the public on the basis of a loan agreement — off-balance sheet records
Assets received from the public
Taking down revenue from the sale of construction services in exchange for the right to receive benefits
Intangible assets
Revenue from the sale of products (construction services)
take-up of a fixed asset for the provision of services in partnership – off-balance sheet records
Public-private partnership assets
OPERATIONAL STAGE
Settlement of the monetary own contribution provided by the public
Accruals of income
Intangible assets
Recognition of accounting evidence related to:
(a) the provision of services under contract, (b) with the maintenance of a permanent measure in a non-degradable state
Costs of the current period (kind costs, costs of service activities)
Settlements for supplies and services
Cash received directly from service users
Current account (cash, cash on the way)
Revenue from the sale of products (services in operation)
Recalculation of the cost of manufacturing of sold in-service services
Costs of manufacturing the services sold
Costs of service activities
Payment for supplies and services
Settlements for supplies and services
Current account
Depreciation of intangible assets
Costs of the current period (kind costs, costs of service activities)
Derecognition of intangible assets
Repayment of the asset to the public at the end of the contract — off-balance sheet
Public-private partnership assets
Repayment of fixed assets to the public received by way of own contribution in kind — off-balance sheet
Assets received from the public
Chapter VII of CRS No 10 discuss the presentation and disclosure of information on partnership agreements and concession agreements.
The public page shall show in the balance sheet and the profit and loss account:
Table No 5
Remuneration of a private party in the form of payment of a certain monetary amount by a public party
Balance
Profit and Loss Account
Fixed assets, under the additional heading ‘Act intended to provide services under the partnership’
Long-term commitment
Amortisation costs
Cost of foreign services
Financial costs
Remuneration of a private party in the form of a right to benefit from the contract
Balance
Profit and Loss Account
Fixed assets, under the additional heading ‘Act intended to provide services under the partnership’
Accruals of income
Amortisation costs
Other operating revenue
The private page shall show in the balance sheet and profit and loss account:
Table No 6
Remuneration of a private party in the form of payment of a certain monetary amount by a public party
Balance
Profit and Loss Account
Fixed assets under the heading ‘Financial assets’
Financial result
Basic operating costs for construction or improvement works and operating services
Revenue from the sale of products: construction services, operating services
Financial revenue
Remuneration of a private party in the form of a right to benefit from the contract
Balance
Profit and Loss Account
Fixed assets under the heading ‘Intangible assets’
Financial result
Basic operating costs for construction or improvement works and operating services
Amortisation costs
Revenue from the sale of products: construction services, operating services
According to point 7.3. CRS No 10, In order to ensure fair and clear disclosure of information on the implementation of the contract, it is desirable that the parties to the contract provide additional information and explanations. The public website (in the notes to the balance sheet and profit and loss account) should provide:
- (a) the nature (type and scope) of the obligations resulting from the contract in each year of its validity,
- (b) the amount of the obligations resulting from the contract affecting the level of public debt and the deficit in the public finance sector,
- (c) the total amount of expenditure planned and implemented for each year of implementation of the contract,
- (d) the nature and size of the own contribution and the rules for its transfer to the private party,
(e) the results of periodic checks carried out by the public party.[7]
The private page (in the additional information) should present:
- (a) the nature and scope of the use rights of certain assets by a private party,
- (b) rules for the remuneration of the private party,
- (c) the results of periodic inspection by the private party,
- (d) changes in the contract which significantly affect the property, financial and financial situation of the private party,
(e) the conditions for the transfer of the asset subject to the contract after its execution or other provisions relating to that asset.[8]
[1] Communication from the Minister of Development and Finance, dated 19 July 2017 on the announcement of a resolution of the Accounting Standards Committee on the adoption of an update of National Accounting Standard No. 10 Public-private partnership agreements and contract contracts for works or services, Warsaw, 28 July 2017, item 142.
[2] Act dated 29 September 1994 on accounting (i.e. Journal of Laws of 2021, item 207, as amended)
[3] Table based on Tables 1 in Annex 3 to CRS No 10.
[4] Table based on Tables 2 in Annex 3 to CRS No 10.
[5] Table based on Tables 3 in Annex 4 to CRS No 10.
[6] Table based on Tables 3 in Annex 4 to CRS No 10.
[7] National Accounting Standard No. 10, Chapter VII "Presentation and disclosure of information on partnership and concession agreements", point 7.3.
[8] National Accounting Standard No. 10, Chapter VII "Presentation and disclosure of information on partnership and concession agreements", point 7.3.
Author: Michał Zdanowski, project manager.
Graduate of the Faculty of Law and Administration of the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics. Since September 2013 is associated with the law firm Russell Bedford Poland. Specializes in transfer pricing. Together with an experienced team, he supports leading companies in fulfilling tax obligations in terms of transfer prices.