Where Form 1120 C Associations 2023-2024

Good morning, welcome to Core Services and our Core Belief Series. Today, we're going to be discussing the importance of recognizing revenues accurately. I'm John Coughlin, your host for this episode. Before we get started, let's talk a little bit about Core. We specialize in audits and review services for condos and HOAs, and we also offer advisory services to assist the board in fulfilling their oversight duties. Now, let's dive into the topic of revenue recognition rules. These rules are pretty straightforward and similar to those for commercial entities, with one key difference. In the case of condos and HOAs, assessments are considered a commitment by the owners and are payable upon assessment. However, the revenue recognition rules require that if you issue monthly financial statements, you should try to allocate that revenue over each month to recognize it on a periodic basis. When it comes to special assessments, how you handle them depends on the purpose of the assessment. If you're taking out a bank loan to address a deficit in your reserve fund, for example, you need to borrow the necessary funds. The owners have an obligation to pay back the loan amount plus any interest. GAAP (Generally Accepted Accounting Principles) requires you to match the revenue to the construction draws and expenses for the revenue project. Additionally, if the special assessment is expected to be paid over a 12-month period, interest should be charged on the outstanding amount still due from the owners. On the other hand, if the special assessment is for catching up on reserve funds or for covering operating expenses that went over budget, it should be treated as revenue at the time of assessment and as long as it is paid off within 12 months, no interest needs to be charged. Most...