Special Assessments - Revenue Recognition
From time to time a corporation may need to make a special assessment to pay for emergency expenditures.
There are two revenue recognition issues we must address:
1) When do we recognize the special assessment revenue in the financial statements?
Unfortunately, there is no simple comparison of condominium fees to business revenues, or donation revenues, or taxes.
We account for all fee assessments in the same way, whether they are regular monthly assessments or special assessments. Revenue is recorded when the assessments are due.
In Alberta, a condominium corporation has the power to assess fees without any direct tie to expenses incurred. For example, a corporation may decide on the amount of an assessment years before the money is needed. But we cannot recognize the revenue at the time of the decision, since the corporation can change its decision up until the day the amount is due. Also there are no specific parties being assessed, until the owner on record is known on the day the assessment is due.
2) Where should the revenue be accounted for?
In Alberta, the revenue can be accounted for either in the reserve fund or the operating fund:
If an assessment has been specifically designated to the reserve fund, and this has been communicated to the owners, the assessment should be recognized as revenue of the reserve fund when due. This will resut in a receivable in the reserve fund, if the amounts are not received when due.
If the assessment is only identified as a "special assessment," it should be recognized as revenue of the operating fund. The board can transfer money to the reserve fund as needed.