2. For regulation 40 of the Local Authorities (Capital Finance) Regulations 1997(1) substitute the following regulation—
40—(1) A credit arrangement which is a private finance transaction shall be excluded from section 49(2), and the initial cost and the cost at any time of the arrangement shall be nil, if the authority determine that in accordance with proper practices no item, other than an item specified in paragraph (2), is required to be recognised as an asset in any balance sheet they are required to prepare in accordance with such practices for the financial year in which the credit arrangement comes into being with respect to property which is either:
(a)provided or made available under the transaction; or
(b)constructed, enhanced, replaced or installed under the transaction.
(2) The following items are specified for the purposes of paragraph (1):
(a)any item relating to a contribution by the authority of an asset to any person with whom they enter into the private finance transaction in return for a reduction in the consideration payable by the authority to that person under the transaction; or
(b)any item relating to an asset to be provided or made available under the private finance transaction by any person which is transferred into the ownership of the authority, whether or not upon payment of any consideration by the authority, at the end of the contract term relating to the transaction.”