UK accruing for long term revenue

[biomass]

Hi there

I'm an SME looking for advice to hopefully enhance the reporting of our accounts.

We have several long term (20 year) contracts with the government for Biomass installations.

We basically pay for a biomass system to be installed into a care home, and then get paid from the government for every kilowatt of energy delivered into the care home.

As a rough guide we spend approx £130,000 on an installation and earn approx £30,000 a year index linked for 20 years amounting to roughly £820,000 over the term of the contract.

Are we allowed to accrue any of this future income as our first year accounts look rubbish but in reality we have a fantastic income stream and there's great value attached to each of the boiler systems we've installed but this great value is not recognised in our accounts.

We believe there must be way a way to recognise this significant value so any help will be greatly appreciated

Mark

 

[bklynboy]

I think you are looking at this wrong and the more appropriate answer is to not recognize a loss at inception when installing but instead defer the loss and match it with the revenue stream over 20 years. Note that the biomass install is an asset as it will be used to generate future revenue.

Dont have time to point to the actual guidance so hopefully I got this right for others to chime in.