| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #6905 | Closed | public | Multifamily | Les Sparks |
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My client has a Section 202 Capital Advance (included in net assets) and Section 8 PRAC (non-major program). They also have three other mortgages (with no payments due until the 202 cap advance is discharged) shown as liabilities on the balance sheet. The 4th mortgage was supposed to be forgiven after 15 years, which was 2016. We received a confirmation reply indicating that the loan has indeed been forgiven. What is the proper treatment on the books? Should it be recorded as an addition to net assets or as income? What would be the proper presentation on the statement of activities? |
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From Les Sparks: I think you have choices. Since your debt is an in-substance defeasance, it certainly qualifies as derecognition. How you achieve that is likely not that important to your situation. One question that I have is ‘Why were these treated differently than the 202 Cap Advance?” Since the 202 was treated a temporarily restricted, I would have assumed that the other “forgivable” items would be treated similarly. If this were a profit-motivated project, I would say that that it would have to go through income. IN your case, however, I could call it a change in accounting and place it in (unrestricted?) net assets. No one will complain, if you run it through the P&L. That is likely the most normal thing to do. Les |