This presentation was made by Giovanna Dabbicco, Italy, at the 17th Annual Meeting of OECD Senior Management Officials held at the OECD, Paris, on 2-3 March 2017

1. OECD 17° ACCRUALS
Challenges with Reporting Debt in the
Public Sector *
Giovanna Dabbicco
ISTAT
2-3 March 2017
The views expressed are those of the author and not necessarily of ISTAT or other organizations

2. Key statistical issues: Debt 1/3
• Various Measures of Debt i.e. Nominal
(Face) value; Market value
– But rather complementary perspectives
• Gross Debt measure versus Net of
financial assets
– a single definition for Net Government Debt at
international level is not yet agreed
• Narrow versus Wide range of financial
liabilities.

3. Key statistical issues: Debt 2/3
• Liabilities coverage
– debt instruments mainly: debt securities and loans
– But other accounts payable, and further
–  IN/OUT Debt (UN) Recognition i.e.
• Unrecognized unfunded government pension
liabilities ; civil servants' pension funds
• Unreported leases
• Unreported (OFF) PPP public-private liabilities
• (Contingent ) Liabilities of public corporations
• Sale leaseback liabilities
• Swap payments “off-market” exchange rate

4. Key statistical issues: Debt 3/3
• Sustainability VS debt
• Gross debt level has proven to be not the same as
sustainability
– i.e. Sovereign crisis involved countries respecting gross debt
ceiling
– Countries may use cash and liquidity at minimum to reduce debt;
incentive disposal of financial assets
• Net debt may be better and more informative because it
takes account of assets
• But ultimately projection of cash flows are needed to see
if debt obligations can be met as they fall due.
– i.e. government to model tax flow into the future

5. Key statistical issues: PPP & Concessions
1/2
• PPP VS Concessions
– Government VS final user is main source of revenue of
the partner after construction
– ‘Dedicated’ asset built (or exiting)
• Procurement contracts VS PPP & Concessions
– Economic owner of the asset built: Either government or
the partner ( on/off -balance sheet: GFCF & Debt)
• Economic owner
– Who bears Risks & Rewards
– If not conclusive  Control of the asset
• EPEC guide + MGDD
– 16 themes to assess

6. Key statistical issues: PPP & Concessions
2/2
– To measure: overall contractual value and adjusted value
of PPP contracts
• Reporting specific issue : If corporation assessed as
economic owner and if government obtains legal and
economic ownership at the end of the contract without an
explicit payment  Government to gradually builds up other
accounts receivable and private partner to gradually
accrues other accounts payable.
– Both values  equal to the residual value of the assets
at the end of the contract period;
– Or alternatively,  Capital transfer approach

7. Key statistical issues : Leases 1/2
Three types in macroeconomic statistics:
– Operating leases, Financial leases, and Resource leases
– Distinction criteria: difference between legal and economic ownership
• As PPP, economic owner determined by assessing which
unit bears majority of risks and receive majority of rewards of
assets
– Operating & Resource leases  Legal = economic owner
– Financial lease change of economic owner: Legal ≠ economic
owner
• One indicator of Financial Lease: period usually whole of the economic
life of the asset
• One indicator of Operating Lease: legal owner (decides and) provides
asset’s repair and maintenance
• Impact of Symmetry if Accounting Model for Lessee ≠ Lessor

8. Operating lease Rentals as payments for a Service, Intermediate
consumption or final consumption expenditure by general
government, households and NPISHs
Leased asset shown on Balance Sheet of Lessor
GFCF + CFC Legal=Economic owner= Lessor
Financial lease User financed by a (notional) loan from the lessor
Loan= Present Value of Payments
 Re-payment of principal and payments of interest on the
Loan
FISIM (if lessor is a financial intermediary): intermediate
consumption or final consumption expenditure by general
government, households and NPISHs)
Leased asset on balance sheet of Lessee 
GFCF +CFC Economic owner= Lessee
Resource lease Payments for the use as rents = Payables due (Property
Income)
Resource (i.e. Land) on Balance Sheet of Lessor
No CFC but decline in value recorded as an economic
disappearance of non-produced assets (‘depletion of natural
resources’ [K.21])
Key statistical issues :Leases’ Recording 2/2