The new guidance, which came into effect on 1st July, follows consultation between the Treasury, the accounting profession and contractors. It clarifies the relative risks borne by the principals to a PFI contract.

The assessment of risk is based on the potential for variation in payment/revenue streams relating to features of the property. This principle is not dissimilar to the approach adopted in the Treasury's interim guidance, but can be narrower in practical application.

The revised guidance, following the Accounting Standard Board's Application Note (published 1998), excludes the commercial consequences of purely service related risks in the contract when looking for variability rather than the approach in the interim guidance which looked at all risks inherent in the contract.

To date some 140 PFI have been signed worth £4.7bn since May 1997 including the largest new hospital building programme in the history of the NHS.

Contact: Treasury 0171 270 4558