Accounting for PFI

Laing has adopted accounting policies that are compliant with International Financial Reporting Standards (IFRS,) in so far as it has been codified and endorsed by EU member states, and therefore is compliant with Article 4 of the EU International Accounting Standards (IAS) regulations. Laing also complies with IFRS as issued by the IAS Board. Individual project companies, as unlisted entities, continue to account in accordance with UK GAAP.

Although individual project companies (SPCs) under PFI contracts may have different accounting policies depending on their investing partners, John Laing has adopted consistent accounting policies across its portfolio of projects.

The Group has three kinds of investments in project companies, with different accounting treatments for each:

• Subsidiaries (where we have control of the company)
• Joint ventures (where the company is under the joint control of two or more parties)
• Associates (where we have a significant influence but no control or joint control over the company)

The accounting treatments are as follows:

Subsidiaries – accounted for in accordance with IFRS 3 ‘Business Combinations’ using the acquisition method, whereby 100% of the results, assets and liabilities of the Subsidiary are consolidated on a line by line basis in the Group accounts.  Minority interest is shown to reflect the minority shareholders’ share of profit and net assets.

Joint Ventures - accounted for in accordance with IAS 31 ‘Interest in Joint Ventures’ using the proportionate consolidation method, whereby Laing’s share of the results, assets and liabilities of the Joint Venture are consolidated on a line by line basis in the Group accounts.

Associates – accounted for in accordance with IAS 28 ‘Investments in Associates’ using the equity method of accounting.

Fixed Asset or Financial Asset

In the absence of an accounting standard relating to service concessions, the Laing Group has interpreted the provisions of IFRS in determining the appropriate treatment of the principal assets of, and income streams from, PFI and similar contracts.  Where it can be demonstrated that the balance of risks and rewards derived from the underlying assets are not borne by the SPC, the asset created or provided under the contract is accounted for as a financial asset and is classified as a current asset. Otherwise it is accounted for as a fixed asset.