Ireland Lifetime Membership Reserve

[conor ward]

A golf club offered its members an opportunity back in 1992 to purchase a lifetime membership. 107 members paid into it and the reserve is currently €303,879 in accounts. The previous accountants have let it sit in the accounts as a reserve since 1992. 12 members are now deceased and 25 are non-playing which leaves 70 current players still benefiting from life membership. Each member is currently saving €280 each year from having lifetime membership. How do we write this off to the P/L? How do you categorize the current "reserve" of €303,879, it is actually "deferred income" that should be written off to the P/L rather than sitting there as a reserve? Should we also take into account the loss of revenue each year which is currently €19,600 due to the 70 current life members?

 

[kirby]

It is definitely a deferred income account to be taken into income over time.
If you want to be scientific about it, back in 1992 each member's life expectancy would have been figured out and their own fee amortized over that period. Less scientific would have been to evaluate the group's average life expectancy and figured a term of amortization for the whole group's fee of 303,879. Anyway, do something like this now and catch up to where you should be (that means a big increase to income for this) and then begin amortizing periodically.

You can't make some entry for the "loss of revenue". You already bear these costs as it is.

 

[conor ward]

Thanks Kirby. Your reply is actually what I had been thinking so I'm happy you confirmed this. cheers