How does the Canadian Government treat special assessment tax in governmental accounting?

Expert Solution

Special assessment tax is generally local improvement charges which mandatory charges imposed on residential, commercial, and industrial properties to pay for additions or improvements to public facilities likes street lighting, pave, repair sidewalk or installing water mains or sewers. lighting. The municipality constructs the works and then recoups the cost through a special assessment on the properties that directly benefit from the government expenditure. Government imposes special assessment tax on property owner to help specific infrastructure projects, such as creation or upkeep of roads, schools or sewer lines. This tax can only be charged to taxpayers whose property lies within a designated special assessment district.

Treatment of Special assessment tax in government financial statements.

When government impose charges for street cleaning, snow removal, landscape maintenance it is service type - Exchange transactions.

Accounting for Service type special assessment is accrual basis.
It report revenue when the service is provided and amounts are available
It report deferred inflows for revenues not received during period of availability.

When government pays for improve or add infrastructure related to specific properties like roads, sidewalks it is capital.

Accounting for Capital special assessment if debt is issued and government is obligated in some manner for the debt - record receivable and unavailable revenue.
If government is not obligated – no receivable is recorded, activity is recorded in an agency fund.
If capital improvements are financed with existing funds –records receivable and unavailable revenue in fund that provided the resources.
Recognize prepayments as revenue when collected.

ekkarill92 answered 1 year ago

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