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- Feb 14, 2017
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Here is my situation; I work as an accountant for a property management company. We specialize in subsidized housing, HAP, tax credit, RD, ect.
A few of these properties received grants in the form of section 1602 tax credits. This was part of the stimulus package back in 2009-2011. The way we have been treating properties with exchange funds is amortizing them over the life of asset, 27.5 years straight line, with the entry being a debit to the deferred revenue account and a credit to a deferred income account. A property owner with multiple properties with exchange funds requested that I set up a contra account for the deferred revenue, similar to how you would use an accumulated depreciation or amortization account for an asset. l did some quick research, found that GAAP doesnt offer much guidance for govt grants and most follow the international standard for government grants, and went ahead and created the contra account. Now the entry to record the deferred revenue is a debit to the contra account and a credit to the income account. I didnt see anything wrong with it.
It shows on the balance sheet like this
Sec 1620 exchange funds: xx,xxx,xxxx
less: amortization: (x,xxx,xxx)
Net exchange funds: xx,xxx,xxx
My boss came in this morning and told me that the presentation was incorrect and not GAAP and I would have to notify the owners and eliminate the contra account. I disagreed, but he's the boss, so unless I can present a solid argument as to why this presentation isnt incorrect I will have to do as told. Oh, also, the managing partner of the entity that has the properties with exchange funds is a CPA and seems very knowledgable to me so I am very much under the impression that using a contra account is not against any GAAP principals.
Any opinions? Guidance? Anything would be welcome.
Thanks!
A few of these properties received grants in the form of section 1602 tax credits. This was part of the stimulus package back in 2009-2011. The way we have been treating properties with exchange funds is amortizing them over the life of asset, 27.5 years straight line, with the entry being a debit to the deferred revenue account and a credit to a deferred income account. A property owner with multiple properties with exchange funds requested that I set up a contra account for the deferred revenue, similar to how you would use an accumulated depreciation or amortization account for an asset. l did some quick research, found that GAAP doesnt offer much guidance for govt grants and most follow the international standard for government grants, and went ahead and created the contra account. Now the entry to record the deferred revenue is a debit to the contra account and a credit to the income account. I didnt see anything wrong with it.
It shows on the balance sheet like this
Sec 1620 exchange funds: xx,xxx,xxxx
less: amortization: (x,xxx,xxx)
Net exchange funds: xx,xxx,xxx
My boss came in this morning and told me that the presentation was incorrect and not GAAP and I would have to notify the owners and eliminate the contra account. I disagreed, but he's the boss, so unless I can present a solid argument as to why this presentation isnt incorrect I will have to do as told. Oh, also, the managing partner of the entity that has the properties with exchange funds is a CPA and seems very knowledgable to me so I am very much under the impression that using a contra account is not against any GAAP principals.
Any opinions? Guidance? Anything would be welcome.
Thanks!