In May 2020, the Financial Accounting Standards Board (FASB) – in response to COVID-19 – elected to again delay by one year the complex implementation of Topic 606 Revenue from Contracts with Customers. As a result, any company that had not completed the implementation of this standard was given an additional year to comply.
However, effectively, this means that all homeowners associations (HOAs) with fiscal years beginning January 1, 2020 must implement the guidance if they have not already done so.
An analysis of existing fund balances and accounting policies and procedures should be completed in order to implement requirements properly.
Here is a summary of the required changes to financial statements:
- Replacement fund assessment revenue cannot be greater than the amount which is spent on repairs and replacements in the year presented.
- Dues amounts which are allocated to the replacement fund will be recognized as a contract liability until used for the purpose previously stated.
- Excess operating amounts transferred to the replacement fund will remain a fund balance.
- The entity must determine whether replacement fund interest income, miscellaneous income, and excess operating transfers will be recognized in the year received.
- Expanded disclosures so users understand the changes implemented.
If your Homeowners Association needs assistance navigating these financial statement issues, call Osborne Rincon at (760) 777-9805.
Monica S. Duarte – CPA, MSA and CFE – is the Audit Senior & Firm Administrator for Osborne Rincon CPAs. She graduated from Cal Poly San Luis Obispo in Business Administration, and received her Master’s in Accountancy from Texas A&M. Osborne Rincon is one of the oldest and most respected full-service accounting firms in the Coachella Valley. To learn more, call (760) 777-9805 or go to www.OsborneRincon.com.