Revenue Recognition of Special Levies

Special Levies - Revenue Recognition

From time to time a corporation may need to assess a special levy.

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.

The Ontario CPA Institute, in its 2013 publication on Accounting, Auditing and Tax Guidelines for Ontario Condominium Corporations, page 16, concluded that "revenue and a receivable should only be recorded when assessments are levied and legally enforceable and subject to the lien provisions of the Act."

Generally, we account for all fee assessments in the same way, whether they are regular monthly assessments or special levies. Revenue is recorded when the assessments are due. However, if a special levy is restricted to certain expenses, the levy should be deferred and recognized as revenue when the related expenses are incurrred.

2) Where should the revenue be accounted for?

• If a levy has been specifically designated to the reserve fund, and this has been communicated to the owners, the levy would ideally be recognized as revenue of the reserve fund when due. This will result in a receivable in the reserve fund, if all amounts are not received when due. If the Corporation does not have separate receivable ledger for the operating and reserve funds, the special levy can be recognized as revenue of the operating fund, and transferred to the reserve fund when received. 
• If a levy is not restricted to the reserve fund, it should be recognized as revenue of the operating fund. The board can transfer money to the reserve fund as needed.