Purpose and scope of National Accounting Standard No 10.

National Accounting Standard No. 10 „Public-private partnership agreements and contracts for works or services concessions"[1] (hereinafter referred to as CRS No.

10) is the definition of the accounting act[2] the principles of valuation and accounting and presentation and disclosure in the financial statements of assets and liabilities, revenue and costs resulting from public-private partnership agreements as defined by the Article 7(1) Act dated 19 December 2008 on public-private partnerships[3] (hereinafter referred to as: Partnership Act)[4], and contracts of works or services concessions within the meaning of Article 3 and Article 4 Act dated 21 October 2016 of a contract of concession for works or services[5] (hereinafter referred to as the Concession Act)[6].

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."[7]

According to point 1.3. CRS No 10 The following aspects are common features of public-legal partnership agreements and works concessions:

„- the public party initiates a public-private partnership, chooses a private party and, when concluding the relevant agreement, most often applies either the provisions of the Partnership Act, or the provisions of the Concession Act, or the provisions of public procurement law,

- the public party is entitled to monitor the performance of the contract,

• the private party uses on behalf of the public party an asset intended to provide services under a public-private partnership for a period specified in the contract,
• the private party is required, after the end of the contract, to transfer the asset to the public on a non-degradable basis, taking into account its use as a result of proper use.’[8]

CRS No 10 defines the public website as a public entity within the meaning of Article 2(1) Partnership laws[9]  or as a contracting authority within the meaning of Article 2(11) Concession Act[10].

CRS No 10 defines a private page as a private partner within the meaning of Article 2(2) Partnership Act (i.e. A foreign entrepreneur or entrepreneur) or as a concession holder within the meaning of Article 2(3) Concession Act (i.e. the contractor with whom the concession contract is concluded).

According to point 1.4. CRS No 10, the content of the standard shall take account of the basic solutions contained in:

• interpretation of the International Financial Reporting Interpretation Committee No. 12 „Contracts for licensed services developed by the International Financial Reporting Interpretation Committee and issued by the International Accounting Standards Board,
• interpretation of the Standing Committee on Interpretation No. 29 „Contracts for licensed services — disclosure of information’ developed by the Standing Committee on Interpretation and issued by the Board of International Accounting Standards,

International Public Sector Accounting Standard No. 32 „Contracts for licensed services. Concessionary, published by the Board of International Public Sector Accounting Standards.

The main differences between the above documents and CRS No. 10 they consist of:

• CRS No 10 sets out the principles of valuation and accounting and presentation and disclosure in the financial statements of assets and liabilities, revenue and costs resulting from the contract with both parties, i.e. public and private parties,
• CRS provisions No 10 they also apply to contracts in which a private party provides services by means of an existing permanent measure which is made as an own contribution in kind to the public and maintains or manages it,

in addition to CRS No 10 a simplified assumption was adopted that: 1) where, under a given contract, a private party has the right to receive remuneration in the form of payment of a monetary amount from the public, the private party shall recognise financial assets and the public party shall have a long-term commitment, and 2) where, under a given contract, the remuneration of a private party constitutes the right to derive benefits from the subject-matter of the contract, the private party shall, in the construction or improvement phase, taking into account the degree of progress of the work, recognise the value of these works as short-term accruals of costs and, after the completion phase, reclassify them to intangible assets.

According to point 1.6. CRS No 10, It does not cover the application of tax rules to CRS contracts No. 10 and issues concerning the impact of liabilities arising from contracts on public debt and the deficit of the public finance sector.

Under the concession agreement, the contracting authority entrusts the concessionaire with the performance of works or the provision of services and the management of these services for remuneration.

In case of entrustment to the concessionaire:

• 1) execution of construction works - remuneration constitutes only the right to operate the work under contract or such a right together with payment (contract of works concessions);
• 2) the provision of services and the management of these services - remuneration constitutes only the right to perform the services covered by the contract or such right together with payment (service concession agreement).

The concessionaire shall bear the economic risk associated with the operation of the construction site or the provision of services and covering the risks associated with demand or supply.

The economic risk must be borne by the situation in which, under normal operating conditions, the concessionaire does not have a guarantee of recovery of the investment costs incurred or costs associated with the operation of the works or services covered by the concession contract and is exposed to market fluctuations and, in particular, its estimated potential losses associated with the performance of the concession contract cannot be merely nominal or negligible.

In assessing economic risks, the net present value of all investments, costs and revenues of the concessionaire shall be taken into account in a coherent and uniform manner.

Article 4.

The provisions of the Act shall apply to concession contracts the estimated value of which is equal to or exceeds the amount 130,000 PLN.

(a) the public finance sector unit within the meaning of the public finance rules,

(b) other than those specified in point (a), a legal person established for the specific purpose of meeting needs of a general nature not of an industrial or commercial nature, not operating under normal market conditions, the purpose of which is not to generate a profit and not to incur losses resulting from the pursuit of business, if the entities referred to in that provision and in point (a), either individually or jointly, directly or indirectly by another entity:

• – They finance her in over 50% or
• – hold more than half of the shares or shares, or
• – supervise the management body, or
• – have the right to appoint more than half of the supervisory or management body,
• (c) associations of entities referred to in point (a) and b;

[10] Ordering - this means:

• (a) the entity in question under Article 4 Public procurement rights,
• (aa) the entity in question under Article 4 Public procurement rights, in so far as it implements one from sectoral activities, in so far as the concession contract is concluded for the purpose of carrying out sectoral activities,

(b) a public undertaking by which the executing undertaking must be understood one from sectoral activities to which the entity concerned under Article 4 Public procurement rights, individually or jointly with other such entities, directly or indirectly by another entity shall have a dominant influence, in particular:

• – holds more than half of the shares in that undertaking or
• – hold more than half of the votes for shares issued by that undertaking or resulting from shares in that undertaking, or
• – has the right to appoint more than half of the management or supervisory body of the undertaking
• – where the concession contract is concluded for the purpose of carrying out sectoral activities,

(c) an entity other than that specified in point (a)-(b) which pursues activities on the basis of specific rights or exclusive rights in question under Article 5(2) Public procurement rights awarded for the purpose of carrying out sectoral activities, provided that the concession contract is concluded for the purpose of carrying out sectoral activities.