Theoretical framework on Public Private Partnership and Service Concession Arrangement, before and after

ASC, PPP contractual:

Service Concession Arrangements (ASC)

Few years after the adoption of IFRIC 12 and the previous long, tiring, unclear (Frab, 2007; Nobes, 2008: 183; Martiniello, 2011) and controversial (Kaufmann, 2006), endorsement on accounting treatment of concessions (European Commission, 2008: 15; Campra, 2012), literature, especially international literature paid more attention, (Paris, Cruz, Rodriguez, Brugni, 2011), to the outline of the different evolutionary developments, applications and interpretation of IFRIC 12, in different countries (Zeff, Nobes, 2010).

International literature has carefully investigated the application of IFRIC 12, and in some EU countries (Bing l., Akintoye A., Edwards, P. J., Hardcastle C., 2005, 2007; Treasury, 2008; McQuaid, Scherrer, 2010; Heald, Georgiou, 2010; Camfferman, Zeff, 2011; Zeff, Nobes, 2010; Heald, 2011), such as Spain (Acerete, Shaoul, Stafford, 2009; Rangel, Valende, 2009; Rangel, Vassallo, Galende, 2010), France, (Schevin, 2001; Marty, 2011; Dupas, Marty, Voisin, 2011), Denmark (Petersen, 2010), Greece (Roumboutsos, Anagnostoupoulos, 2010), UK (Bringhlie, 2005; Li, Akintoye, Edwards, Hardcastle, 2005, 2007); and other non-EU countries, such as Brazil in particular (Cruz, Silva, Rodrigues, 2009; Lima, 2010; Martins, Andrade, 2009, 2010; Costa, 2010; Paris, Rodrigues, Cruz, Brugni, 2011), Japan (Uozumi, 2007) or Australia (Raisbeck, Duffield, Xu, 2010) offering comparative analysis with applications in different countries.

The following tables show the aspects characterizing the different forms of public-private partnership in the interest of their useful and systematic organization, in order to compare different countries or similar business models to better support the choices of public decision-makers and of concession companies.

The following table, offers a scheme of the selected literature and summarizes the content and variety of the current national and international debate on the topic of PPP and the SCA.

Table 3: Selected Literature

Anglo-Saxon Literature	(Bing L., Akintoye A., Edwards P. J., Hardcastle C., 2005, 2007; Treasury, 2008; McQuaid, Scherrer, 2010; Heald, Georgiou, 2010; Camfferman, Zeff, 2011; Zeff, Nobes, 2010; Heald, 2011)
Spanish Literature	(Acerete, Shaoul, Stafford, 2009; Rangel, Valende, 2009; Rangel, Vassallo, Galende, 2010)
Literature of German-speaking countries	(Budäus, B Grüb, 2008; Muller, 2008; Papenfuß, C Schaefer, 2009; Jacob, C Hilbig, D Neunzehn, T Popp, T Uhlig; Herbold, 2012; Hodges, 2013 )
Literature of Latin American countries	(Cruz, Silva, Rodrigues, 2009; Lima, 2010; Martins, Andrade, 2009, 2010; Costa, 2010; Paris, Rodrigues, Cruz, Brugni, 2011)
Italian Literature	(Capasso, 2002; Amatucci, Vecchi, 2008, 2009; Laghi, 2010; Campra, Faraudello, Malfatti, Passarani, 2011; Campra, 2012; Pozzoli, 2011; Martiniello, 2008, 2012; Vecchi, Hellowell, 2012; Cappellaro, Marsilio, Cuccurullo, 2009, 2011; Cappellaro, Longo, 2011)

These comparative analyses highlighted application problems and confusion in the various systems of service agreements involving public authority and private entities, in relation to creative accounting treatments asymmetries (Martiniello, 2011), produced by (immaterial and financial) unusual methods, as well as by the responsibility of the entities or parties affected by the demand risk (Campra, 2012: 2705), also through the different models of accountability adopted (Ricci, 2005, 2010).

The theoretical framework that outlines, making it useful to deepen the evolutionary trends in the application of IFRIC 12 in different countries, in the light also of new paradigms that are setting up new conceptual-logical cognitive maps in re-thinking the common goods, contractual communities (Foldvary, 2010), the collective property; the allocation and risk management; report systems and (in) dependency between ownership and control (Flick, Cearns, 2008; Ellwood, Lacalle, 2012), and control over significant residual interest of infrastructure (Campra, 2012: 2678).

The interpretation of IFRIC 12 also allows researchers to avoid confusion in the classification, measurement, and detection of SCAs involving public and private entities such as outsourcing contracts, contracts of network capacity, take-or-pay contracts, ruled instead by IFRIC 4 (Treasury, 2008; Heald, Georgoiu, 2010. Laghi, 2010: 6); or even errors in classification of PPP, where the prevalence of economic substance is entirely public, as in the case study, and then can be traced in the discipline of IAS 20.

Among other positive aspects of IFRIC 12, there is the attempt to improve the budgetary information for investors, clarifying the nature and risks of the ASC, object recognition and measurement.

However, several authors in literature measure that the centrality of complexity is also interpretative effect and not only because of the demands of public finance (Laghi, 2010).

The registration or cancellation of a budget, are sometimes connected and based on the model of "risk/benefit" transfer, sometimes related to the prevalence of the "control" on the activity (Laghi, 2010; Martiniello, 2011; Head, Georgiou, 2011), which leads to an absolute complexity of interpretation. Complexity that recurs like a mirror (Head, Georgiou, 2011), evaluating the adoption of IFRIC 12 compared to evaluation based on the model of "control" (control model), or to risk/benefit model "(risk and renard model), or the new information provided by institutions such as the UTFP sustaining principle-related costs for implementation and management (Martiniello, 2011) and not dependent on budgetary implications of local and more generally on public finances (Internal Stability Pact).
Section III

IFRIC 12 – Accounting Model

The Italian experience: An empirical analysis.
The Italian experience, already investigated in the literature by authoritative doctrine (Campra, 2012), it is represented by different companies operating in different economic areas (transport, energy, water), for the development, implementation and maintenance of works and public utilities on the basis of economic activity performed.
The adopted accounting model

According to the provisions of IFRIC 12, concession infrastructure shall not be recognised as property, plant and equipment of the operator because the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator.

With reference to the intangible asset model grantor, in return for construction services and infrastructure improvement, acquires the right to charge users of the infrastructure and, therefore, the concessionaire’s cash flows do not result from the grantor, but are related to the actual use of the infrastructure by users so that demand risk is supported by the concessionaire.

Finally, there are some cases where the concession agreement envisages the chance for the concessionaire to be paid for its construction services in part by a financial asset and partially by an intangible asset. In such cases the accounting model is mixed and the two components of the agreement should be separated, in particular the distinction of the financial activity fraction from the intangible asset fraction (Campra, 2012).

Section IV

IFRIC 12

Financial Reporting and Business Models: the case studies

From the empirical analysis conducted on the financial statements of listed Italian companies under IFRIC 12 adoption, we have reorganized the classification of enterprises in different sectors, according to economic activity. In particular, we first created three macro-sectors that are related to the type of output produced. The economic sectors analyzed, are:

• 
  Transport;
  
• 
  Energy;
  
• 
  Water.
  

The companies in each macro-sector can be further subdivided according to the production process adopted. For example, in the macro-sector 'transport' can be distinguished:

• 
  Creation of infrastructure and operation of services 'on the ground' in a specific location (port and airport);
  
• 
  Production and management of the road network (road and rail transport).
  

• 
  Creation of infrastructure (gas, wind energy, hydrocarbons);
  
• 
  Production and management of the network (waste disposal);
  
• 
  Maintenance of the networks (electricity).
  

• 
  not listed companies on a regulated market (eg.: ports), despite play an important role in macro-sector both in terms of strategic importance, both level of investments in the various PPPs . These companies do not fall within the scope of analysis of this work, just because unlisted;
  
• 
  listed companies on a regulated market in which the shareholder is a major component, some cases, control of the central public sector and / or local (eg.: airport, rail).
  

The selected case studies, are in the first case, an anomaly for recognition and accounting treatment models of IFRIC 12 (financial model); in the second case a quoted company representing the analyzed and classified reference sample of Italian listed companies.

As a test case, we will describe in the next section, the business model emerging from the activity of financial reporting (in adoption of IFRIC 12), the company Ferrovie Nord Spa, which operates in the field of public transport rail.

The first case study, is characterized by being held in a majority of share capital by the same public entity that is grantor of the functional privatization (grant) for the realization of interests and works of public interest and utility. The control upon the concessionaire/operator is held by the grantor, subject as the majority shareholder of the concessionaire of works and services. Therefore, through the identified methodological support, we will try to answer the following questions: in the case the operator is essentially a private entity and coincident with the grantor, does IFRIC 12 apply? Is it possible to talk about Public-Private Partnership or maybe, is it more appropriate to refer to Public Public Partnership? Does IFRIC 12 apply?

Ferrovie Nord Milano S.p.A is a joint stock company. It is a holding company that provides for:

• an administrative role, providing the functions and support services for conducting the management that is typical of the subsidiaries. The Ferrovie Nord Milan Group represents the national most important railway company following the Ferrovie dello Stato and operates mainly in Ticino and Lombardia, Piemonte.