International Handbook on Public–Private Partnerships
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International Handbook on Public–Private Partnerships

Edited by Graeme A. Hodge, Carsten Greve and Anthony E. Boardman

In this timely Handbook, leading scholars from around the world explore the challenges presented by infrastructure PPPs, and contemplate what lies ahead as governments balance the need to provide innovative new infrastructure against the requirement for good public governance. This Handbook builds on a range of exciting theoretical lenses that span several disciplinary boundaries. It presents innovative insights and informed perspectives from an international base of empirical evidence.
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Chapter 11: Accounting for PPPs in a Converging World

David Heald and George Georgiou


1 David Heald and George Georgiou Why does PPP accounting matter? Accounting academics often focus on the tension between setting accounting standards on the basis of ‘principles’ (high-level statements and aspirations) and ‘rules’ (prescriptions about how to do it). Principles are difficult to state in unambiguous language, whereas the precision of rules invites sophisticated ploys to circumvent their intention. The best way to grasp the essence of technical debates about PPP accounting is to recognize two key points: ● ● Mapping economic reality, whether in terms of the financial reporting of entities or the compilation of national accounts, requires the drawing of lines (i.e. distinctions), the location of which may substantially affect reported data. There is a gulf between the high-mindedness that officially surrounds the promulgation of accounting standards and the incentives of various actors to game the standards, at both the formulation and implementation stages. Whereas few people know the detail of financial reporting or national accounts standards, far more understand the notions of seeking the best deal available and of gaming the rules. ‘Arbitrage’ in financial markets involves taking advantage of price differentials between markets, thus improving market efficiency and liquidity. In contrast, the 2008 global financial crisis has highlighted the effects of non-market forms of arbitrage: In the past, authorities around the world have tended to be tolerant of the proliferation of complex legal structures designed to maximise regulatory and tax arbitrage . . . Now we may have to demand clarity of legal structure. (Lord Adair Turner, Chairman of the UK...

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