Who accounts for assets constructed on behalf of another entity?

The Public Sector Accounting Forum (PSAF) noted there is uncertainty in practice regarding which entity recognises an asset, and when it is recognised, where assets are constructed on behalf of another entity.

The PSAF noted the following principles that should be considered:

• Entities should assess whether they control an asset in order to establish if they should recognise it – for both work in progress and finalised assets.
• The assessment of control is based on the specific arrangements in place, including funding arrangements. Not all terms and conditions may be in writing.

Arrangements establish the type of relationship(s) that exist, e.g. a principal-agent relationship, a contractor-customer relationship, etc. The relationships that will determine which party should recognise an asset.