Very Unusual Transaction-Thoughts on Accounting for it

In 2017 the Muni purchased some land for $700k for supportive housing. The RD was on board an provided a grant to the City for $700k but the City retained ownership of the land. An agreement was struck with BC Housing to build and operate the facility. In 2019 the new Council didn't like the deal with the RD and came to an agreement with the RD to pay back the RD for the non municipal portion of the $700k grant. That amounted to about $450k. So we repaid the grant but are not sure of the best accounting for the payment. The land is already recorded on the books so that is out. The payment is really a payment of what was recorded as a Capital Grant in 2017. So do we have a negative capital grant in 2019? That will look quite strange on our statements and the LGDE's but I can't think of another place to record the cost. I also want to use $150k that is in our Land Sale Reserve to cover part of the payment.
Any thoughts?

Comments

  • Hi Lucky
    I have a suggestion if you want to connect with me offline. [email protected]

  • Is there a written agreement? The wording of it should be helpful, ie refunding the original contribution versus making a payment...

    Good question!

  • Is the RD now part owner of the land?
    DR Investment in Capital Assets
    CR Cash
    ?

    If not, then
    DR Surplus/Reserves
    CR Cash

    Seems too simple though, I'm sure I'm missing something....

  • @Lisa Clark, unfortunately PSAS does not allow a direct DR or CR to surplus/equity. It has to go through the statement of operations.

  • Ahhh yes, it’s definitely Monday!

    Negative capital grant doesn’t seem ideal either.

    I would create a new expense G/L and have lots of notes/backup for your auditors.

    Definitely curious what others suggest though. :)
  • I think due to the materiality of the amount you might have to restate your prior year and reclassify the grant as deferred revenue or account payable. Then in 2019 you debit that liability account. Check with your auditors to confirm.

    Susan Meeds, CPA, CGA
    Director of Finance
    Village of Burns Lake

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