How do you deal with property management issues?
Last year the Financial Reporting Council (FRC) issued FRED 50 setting out the proposed Abstract for Residential Management Companies’ Financial Statements.
The aim of the paper is to assist residential management companies (RMCs) to determine whether they are acting as a principal or agent when undertaking residential service transactions with third parties, and thereby determine which transactions should be recognised in their financial statements.
The main proposals include:
- A RMC always acts as principal (not agent) when entering into transactions, with third party suppliers, relating to the management of maintenance and provision of services to a property
- Service charge expenses incurred by the RMC and the income from drawing on the service charge cash received from tenants should be concurrently recognised in the RMC’s profit and loss
- The cash and other assets arising from service charges received from contributing tenants are held in statutory trust and are not assets of the company. They should not be recognised in the statutory accounts of the RMC but should be disclosed in the notes
Proposed Effective Date – It is proposed that the above will be adopted for periods ending on or after 1st January 2015 with early adoption being permitted.
If you feel that this affects you and your business and want to find out more and see how we can help email us or call 0161 249 5040